On Balance January|February by WICPA

January|February 2013 | Vol. 9 No. 1

The

A publication of the Wisconsin Institute of CPAs | www.wicpa.org

go-to-TAX GURU Robert S. Keebler, CPA, MST, AEP

PLUS:

WICPA members shape tax reform debate Preparing your clients for federal tax changes Reducing exposure to tax preparer penalties

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A publication of Wisconsin Institute of CPAs | www.wicpa.org

January/February 2013 Vol. 9 No. 1

16 Features

Columns

6 Having their say WICPA members testify at state income tax reform hearing. By Cynthia M. Hodnett

24 TAX Proposed federal legislation changes for online retailers Impending federal bill would force online and catalog retailers to collect tax during transactions. By Jennifer H. Jin, J.D.

11 Beyond the numbers: Top three federal tax issues for 2013 Prepare your clients for legislative changes, foreign compliance issues and repair regulations. By Daniel B. Geraghty, CPA, J.D. 16 The go-to-tax guru A passion for estate planning and tax has resulted in a multifaceted career for Robert S. Keebler, CPA, MST, AEP. By Cynthia M. Hodnett 20 Going global Mike Lauber, CPA gains a global accounting perspective by volunteering in Brazil. By Cynthia M. Hodnett

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26 INDUSTRY Tax return preparer penalties: Really? Implementing quality control procedures that include an independent review can minimize exposure to preparer penalties. By Deborah K. Rood, CPA, MST 28 FRAUD Managing vendor data security and privacy risk of third-party vendors Security breaches often result in financial and legal repercussions for many companies. By Jan Hertzberg, QSA, CISA, CISSP, CIPP/IT and Amy L. Henselin, CPA 30 TECHNOLOGY An evolution in CPE: Integrating the tablet, Wi-Fi and the cloud New learning model takes onsite CPE to the next level. By John H. Higgins, CPA, CITP

OFF 11

On Balance

January|February 2013

{ Membership Matters | member benefits }

Belong to something more! By Barb Gamez, vice president of Membership and Marketing, WICPA 2008 Clarion Award Winner

2012-2013 WICPA OFFICERS/BOARD MEMBERS Chair Danica E. Olson, CPA, CGMA Chair-elect Robert A. Gruber, CPA Past-chair Nicholas S. Lascari, CPA, CEA Secretary-treasurer Todd J. Poppe, CPA Directors Thomas J. Alberte, CPA Greta C. Diercks, CPA Kelly K. Miller, CPA Joan M. Phillips, CPA Matthew I. Raunio, CPA Gregory L. Ryan, CPA Carver Smith III, CPA Martin D. Verhelst, CPA Steven R. Volz, CPA AICPA Council David O. Christianson, CPA Karla E. Blair, CPA President & CEO Dennis F. Tomorsky, CPA, J.D., CGMA Vice President of Communications Amy E. Gaeth Vice President of Membership & Marketing Barb Gamez Editor Cynthia M. Hodnett Copy Editor Joan Bahr Design & Layout Angela Wade Advertising Manager Ellen Engel Printing Marek Printing Join us online!

hen you joined the WICPA and became a member of your profession’s leading association in Wisconsin, you did more than just join nearly 8,000 of your peers. You belong to something more. As a WICPA member, you have more access to more resources and opportunities for education and involvement. You also have more credibility and more representation. Upcoming Membership Matters columns will detail the ways you benefit from belonging to something more as a WICPA member. The first area you benefit from is more representation. One of the three core components of the WICPA’s mission includes representing the interests of its members. We fulfill this by serving as an advocate to build relationships and promote the interests of CPAs with governments, regulatory agencies and other organizations. However, we can’t do it alone. As CPAs, you are highly regarded by lawmakers as trusted business advisers who are an important resource when they’re faced with legislation impacting Wisconsin’s businesses or the CPA profession. They rely on us for our information and expertise. That’s why we need as many members as possible to be involved in the political process to maintain a strong presence in Wisconsin’s legislative and regulatory activities.

How you can participate

your peers and clients in the following ways: 1. Contribute to the WICPA Campaign for Political Awareness and Legislative Involvement Fund. Download a brochure with a contribution form at www.wicpa.org/cpaclif. 2. Volunteer to be a legislative contact. A contact’s responsibilities include staying abreast of legislative issues, and fostering and maintaining relationships with legislators in your area. 3. Serve on the Public Policy Committee. You’ll be a part of developing strategy and stances on legislative policy matters and major governmental affairs activities. 4. Contact your legislators. Consider writing a brief letter to a legislator urging him or her to support a WICPA position. As a constituent who spent time writing them and is likely to vote, your message is sure to get attention. 5. Join us for Advocacy Day on Jan. 23, 2013. WICPA members will meet with legislators and their staff on current issues impacting the profession and Wisconsin businesses. Be sure to watch for highlights and updates on our day’s efforts. However you choose to get involved, you benefit from more representation among Wisconsin lawmakers and the high level of regard they have for WICPA members. For more information about the WICPA’s government relations efforts and ways to participate, visit www.wicpa.org/government.

You can advocate for the profession, On Balance is published six times a year by the Wisconsin Institute of Certified Public Accountants (WICPA). Change of address should be sent to: Membership, 235 N. Executive Drive, Suite 200, Brookfield WI 53005; Phone: 262-785-0445 or 800-772-6939 (WI/MN); Fax: 262-785-0838; email: jessica@wicpa.org. Statements and opinions expressed are those of the authors and not necessarily those of the WICPA. Publication of an advertisement does not constitute an endorsement of the product or service by On Balance or the WICPA. Articles may be reproduced with permission. © Copyright 2013 On Balance.

On Balance

January|February 2013

Your membership to-do list this month:  Register to attend Advocacy Day 2013: www.wicpa.org/AdvocacyDay2013  Contribute to the WICPA Campaign for Political Awareness: www.wicpa.org/cpaclif  Update your membership profile: www.wicpa.org/memberprofile

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{ Outlook | chair’s letter } “Teaching financial literacy and responsibility to every person benefits us all. What we teach our children goes with them as they navigate through the winding roads of life.”

Spread the wealth by promoting financial literacy

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t’s a new year, and it’s time to make resolutions. For most of us, the top three resolutions are usually losing weight, getting organized, and spending less and saving more. The WICPA may not be able to help with the first two, but there are several ways it helps the public become financially fit. In the past four years, WICPA members have participated in the Reading Makes Cents Program. In this program, CPAs in the Milwaukee area visit elementary schools to promote financial literacy through reading and discussion with their students. If you would like to participate with this inspiring program, please contact Mary Murray at mary@wicpa.org. The WICPA Educational Foundation is also supporting financial literacy by funding several Reality Stores throughout the state. The stores pair high school educators with CPAs and local businesses to organize a financial simulation. During the simulation, students choose a career, receive a salary for the career, and then make decisions on expenses based on a budget they create. Expenses in the budget include housing, transportation, entertainment and taxes. These empowering programs occur throughout the year and volunteers to help at the events are always welcome. Contact Mary if you’d like to volunteer. In addition to the Reality Stores, several members — me included — have spoken to local high school accounting and business classes about various financial topics. Topic requests typically include how to create a budget, the importance of saving and establishing credit. Young minds have some fantastic questions, but our conversations tend to end the same way. It doesn’t matter what your socioeconomic background is. If you spend more than what

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you have in your account, you will be overdrawn, and that doesn’t make good financial sense! The WICPA Public Policy Committee has joined with nonprofit organizations, such as Make A Difference Wisconsin and with legislators to support the incorporation of financial literacy education into curriculum for K-12 students in Wisconsin. Due to budget constraints, only 25 percent of Wisconsin school districts currently teach personal finance, according to the Wisconsin Department of Financial Institutions. Therefore, the best opportunity to further financial literacy training in the school districts is for public/ private collaboration with large companies contributing dollars for materials and volunteers to teach the courses in the classrooms. The WICPA continues to support the AICPA’s 360 Degrees of Financial Literacy initiatives by promoting its most recently published book, “Save Wisely, Spend Happily: Real Stories About Money & How to Thrive From Trusted Advisors,” by Sharon Lechter, CPA. The personal stories and money saving strategies from CPAs in this book are a great resource for people at all stages of life. Teaching financial literacy and responsibility to every person benefits us all. What we teach our children goes with them as they navigate through the winding roads of life. So do your part and spread the wealth! Danica E. Olson, CPA, CGMA is the accounting manager for the Milwaukee Bucks, Inc. Contact her at 414-227-0575 or dolson@bucks.com.

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On Balance

January|February 2013

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{ Spotlight | letter from the editor } “You’d be hard-pressed to find a book, magazine or newspaper that isn’t available digitally. Now, you can add On Balance to the list.”

On Balance enters the digital age

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e’re living in exciting times, as the digital age allows us to access and share information at the touch of a button. You’d be hardpressed to find a book, magazine or newspaper that isn’t available digitally. Now, you can add On Balance to the list. The January/February 2013 issue marks the WICPA’s first-ever, brand-new digital installment of the magazine. Why have we gone digital? In 2012, we surveyed members like you to gauge how we could improve this magazine, and many of you responded. We listened, and now we’re offering you six digital issues each year. Each issue will feature vibrant, high-resolution images. Each will also be password protected, allowing only members like you exclusive access to this valuable member benefit. You can also download a PDF of the magazine, and print or email it. Other features will allow you to zoom in to see larger type, search for words or phrases and jump to online links. Watch for an email containing a link to the new digital issue on Jan. 15. Now I’m sure some of you reading this column are wondering, “What’s happened to my magazine?” Don’t worry if you haven’t gone digital yet. You can still enjoy the same printed version of the magazine that you always have. Whether you choose to read this magazine in print or digital format, you can still find relevant information that affects you as a CPA. Both formats will provide in-depth articles on current

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technical issues and trends affecting the CPA profession. You’ll also learn about conferences, special events, promotions, awards, and new hires and members in the news. You can also learn about conferences, special events, promotions, awards and new hires. This issue of On Balance highlights tax, featuring a cover story about Robert S. Keebler, CPA, MST, AEP, a partner at Keebler & Associates, LLP in Green Bay. Keebler has been a guest speaker on tax issues at various events, including the annual WICPA Tax Conference. In the article, he discusses his multifaceted career in tax and estate planning. Also, read about potential federal tax changes for 2013, best practices for reducing exposure to tax preparer penalties and preventing a data breach.

Cynthia M. Hodnett is editor of On Balance magazine. Contact her at 262-785-0445 ext. 3004 or cynthia@wicpa.org.

HAVING THEIR

WICPA members testify at state income tax re

Photography by Jon Walton

SAY

eform hearing

By Cynthia M. Hodnett

everal WICPA members are providing their professional expertise to Wisconsin lawmakers who are considering reforming state income tax laws On Oct. 18, 2012, Michael E. Friedman, CPA, J.D., Henry A. Jasper, CPA, MST, and Richard J. Kollauf, J.D., CPA testified at a hearing in Madison to identify solutions to simplify the state tax code and discuss the potential for reform. With many years of combined tax experience, the three CPAs said they wanted to provide testimony from a practical perspective. “It is very important when the topic is one that directly affects CPAs,” Kollauf said. “Testifying at such hearings is a form of governmental involvement that is incumbent on all citizens.” Their testimony was heard by the Joint Legislative Council’s steering committee, which developed a symposia to study the possibilities for income tax reform. The bipartisan committee consists of four state Assembly representatives and four state senators. Rep. Robin Vos (R-Rochester) is the group’s chair. WICPA member and Rep. Dale Kooyenga, CPA (R-Brookfield) is vice chair. Kooyenga cited data that ranked Wisconsin the fourth highest in the nation for its state-local tax burden. Wisconsin taxpayers, on average, paid $112.04 per $1,000 of personal income in state and local taxes in fiscal 2008–2009. Alaska taxpayers paid the highest, at $206.39 per $1,000. South Dakota posted the lowest tax burden at $79.30. The national average was $102.10 per $1,000 of personal income, he said. Per capita, Wisconsin ranked 16th, with taxpayers paying $4,255.40 to local and state reserves. The state placed No. 11 for income taxes, with the average Wisconsin taxpayers paying $27.73 per $1,000 of income.

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L-R: Jasper, Kooyenga, Kollauf and Friedman

Visit http://tinyurl.com/8tu7kuh for information and comments from past tax income reform hearings. “The state’s income tax disproportionately affects the middle class, and it is one of the goals of the symposium to create a tax code that is fairer and flatter,” Kooyenga said. At the October meeting, the CPAs recommended that lawmakers: • Simplify the tax laws by adopting federal provisions; • Eliminate various taxes, including the minimum tax, personal property taxes on businesses, economic development surcharge and the Wisconsin estate tax; • Reduce overall tax rates; and • Apply laws consistently between different types of entities, including C corporations, S corporations, partnerships and individuals. “The goals of reforming the individual tax structure in Wisconsin should focus on creating jobs, promoting fairness, and providing simplicity,” Friedman said. “The current tax system is much too complex. According to the instructions to Form 1, there are at least 120 possible adjustments to federal adjusted gross income. “There are also 38 credits,” he added. “I recommended starting the calculation with federal adjusted gross income, eliminating almost all the modifications and

credits, and lowering the tax rates. This should be done on a revenue neutral basis.” The committee’s goals are to provide an array of opinions and ideas to develop a dialogue among members of the state Legislature, Kooyenga said. From these discussions, the committee will develop solutions to reform the state income tax, which Gov. Scott Walker could include in the 2013–2014 state budget. Past hearings included testimony from officials from the Legislative Fiscal Bureau, Department of Revenue, Tax Foundation, Institute on Taxation and Economic Policy, and the Wisconsin Taxpayers Alliance. The Legislative Fiscal Bureau identifies Wisconsin’s tax code as one of the most progressive in the country, Kooyenga said. The top 2.5 percent of earners pay more than 25 percent of state income taxes, the top 22 percent of wage earners pay more than 64 percent, and the top 36 percent pay more than 78 percent. Because of refundable tax credits, some Wisconsin residents pay a negative income tax, which means they pay no tax but receive a tax refund.

The committee is also considering the possibility of reducing tax rates to stimulate economic growth. The Tax Foundation rated Wisconsin as one of the least favorable states for business: 43 out of 50, Kooyenga said. During his testimony, Jasper gave several examples of how many of his clients must compute depreciation at least five different ways, which creates huge compliance costs. “I hope to impress upon the legislators the real impact on businesses and individuals of having a tax system that is too complicated both in terms of increased paperwork and compliance costs, and the negative impact on trying to attract businesses to come to Wisconsin and stay here,” he said. The committee is also examining the state withholding $1.5 billion more than what taxpayers owe the state each year, Kooyenga said. It’s also reviewing the “marriage penalty.” He referred to a Wisconsin Taxpayers Alliance study, which shows that married couples with take-home

pay of $80,000 end up paying 15 percent more than single filers. This tax will affect 51 percent of the married taxpayers in Wisconsin who file joint income taxes.

Cynthia M. Hodnett is editor of On Balance magazine. Contact her at 262-785-0445 ext. 3004 or cynthia@wicpa.org. While many members of the WICPA agree with the principles and opinions set forth in supporting testimonies and documents regarding state income tax reform, these views aren’t necessarily shared by the WICPA, its members or employees.

Visit http://tinyurl.com/9fguyvf to review the income tax reform hearing featuring WICPA members.

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On Balance

January|February 2013

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BEYOND THE NUMBERS: TOP THREE FEDERAL TAX ISSUES FOR 2013 By Daniel B. Geraghty, CPA, J.D.

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While most people’s top tax topics are probably those currently sitting on their desks, several others are possibly high on their lists for 2013.

Legislative changes As I write this article, the Bush era tax cuts are set to expire, and according to many, we are standing at the edge of a “fiscal cliff.” Although another extension of the Bush era cuts is possible, it is not likely without compromises. Possible legislation includes establishing new and higher rates for capital gains and dividends as well as ordinary income, carried interests, repealing last-in/first-out, reforming

estate and gift taxes and dealing with the research and development credit, and international tax changes. Whether the changes will be temporary or long term is uncertain, although the era of temporary fixes and sunset provisions likely will continue. Whatever the case, legislative changes promise to be a top issue for 2013. One legislative change that bears note and is effective in 2013 is the health care legislation imposing the Medicare tax on certain net investment income. Had the results of the presidential election been different, the tax may have been delayed either temporarily or permanently. While much planning occurred in 2012 in anticipation of the tax, planning for this new tax will again be a significant issue in 2013.

Foreign compliance issues While not every U.S. person has a foreign financial account, more businesses and individuals are investing offshore. The Internal Revenue Service (IRS) enforcement push for international compliance was started several years ago by disclosures concerning UBS, the Swiss banking giant. Since then, practices have been exposed. The IRS has implemented several offshore voluntary disclosure programs with varying degrees of success. The programs have focused on the Report of Foreign Bank and Financial Accounts requirements. The IRS recently instituted a â&#x20AC;&#x153;permanentâ&#x20AC;? voluntary disclosure program that can be harsh but is consistent with the overall voluntary disclosure philosophy of the IRS. In addition, the Foreign Account Tax Compliance Act (FATCA) is landmark legislation in which the United States imposes tax reporting obligations and onto foreign persons. FATCA imposes various U.S. reporting requirements on certain foreign persons, in exchange for not imposing withholding on payments they receive from U.S. sources. The reporting and withholding obligations will be phased in beginning in 2014. The payments subject to reporting include interest, dividends, wages, and other fixed and determinable income. While FATCA and other disclosure programs will not affect all U.S. persons, the continued push for bringing all of the foreign activity of U.S. taxpayers into the system will be a top issue for 2013.

Implementation of repair regulations

Another top issue for 2013 is the continued implementation of the

On Balance

January|February 2013

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repair regulations. In late 2011, the IRS issued long-awaited temporary and proposed regulations regarding capitalizing certain costs of repairs and maintenance. The new regulations are the result of an eight-year undertaking by the IRS and the U.S. Treasury Department. Given their near universal application to taxpayers, their implementation is an important tax topic for the upcoming year. As noted, the IRS issued temporary and proposed rules in late 2011, which became effective at the beginning of 2012. Final regulations are expected in early 2013. The primary issue addressed in the temporary regulations is whether to capitalize or expense the costs relating to the maintenance and alteration of tangible property, both real and personal. The temporary regulations contain significant guidance on acquisition costs and other expenses relating to property, routine material and supply purchases, repairs and maintenance to existing property (so-called â&#x20AC;&#x153;units of propertyâ&#x20AC;?) and a host of other issues. While a complete discussion of the rules is beyond the scope of this article (the temporary regulations were more than 200 pages), they were comprehensive. The temporary regulations provide that changes to comply with the regulations represent accounting changes under Internal Revenue Code Section 481, and they should be reported as such. In addition, various elections need to be made on an item-by-item basis and/or each year. Implementation will be complicated. In 2012, the IRS issued two revenue procedures to provide transition guidance: Revenue Procedure 2012-19 (procedures for changing to new capitalization rules) and Revenue Procedure 2012-20 (procedures for changing to the new depreciation rules). In addition, the IRS has issued directives regarding audits involving the capitalization rules. Given the broad application and comprehensive nature of the repair regulations, their continued implementation will be one of the top tax topics in 2013.

Daniel B. Geraghty, CPA, J.D. is leader of the Tax Controversy & Litigation Team at Whyte Hirschboeck Dudek S.C. in Milwaukee. Contact him at 414-978-5518 or dgeraghty@whdlaw.com.

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On Balance

January|February 2013

2012 Past Presidents’ Dinner Past presidents of the WICPA Board of Directors and the WICPA Educational Foundation, Inc. Board gathered for an annual photo at the WICPA Past Presidents’ Dinner on Sept. 26 at The Wisconsin Club in Milwaukee.

WICPA Board of Directors Past Presidents

Front row seated L-R: Bart Adams (’95-’96), Duane Kuehl (’81-’82), Nathan Holman (’78-’79), Joe Sperstad (retired WICPA executive director), Larry Rose (’04-’05), LeRoy Schmidt (retired WICPA executive director), Donald Wagner (’92-’93) and Eugene Recknagel (’64-’65) Back row L-R: Ray Petkovsek (’09-’10), Thomas Mickelson (’01-’02), William Goodman (’99-’00), David Christianson (’05-’06), Nicholas Lascari (’11-’12), Karin Gale (’03-’04), Marion Wozniak (’94-’95), Daniel Heerey (’07-’08), Robert Albrecht (’80-’81), David Benner (’83-’84), Eugene Miller (’90-’91) and William Heinrich (’10-’11) L-R: James Miller (’08-’10), Ray Petkovsek (’98-’02), Robert Gruber (’10-’12), Joan Phillips (’04-’08), Robert Albrecht (’90-’91), Eugene Recknagel (’74-’75) and Duane Kuehl (’87-’88)

WICPA Educational Foundation, Inc. Board Past Presidents

On Balance

January|February 2013

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{ In Touch | president & CEO’s message } “I strongly encourage you to begin your own path to leadership by joining a WICPA committee or task force.“

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Your WICPA path to leadership We are always seeking WICPA members like you to serve on the WICPA Board and lead the CPA profession into the future. Informing you about our volunteer leaders’ activities and paths to leadership will hopefully inspire you to begin your own leadership journey. Before you can be elected to the board, you will be required to serve in a volunteer role at the WICPA. The path to leadership generally starts with joining a committee or task force in an area that interests you. After attending a few meetings, you’ll become comfortable with meeting processes and have the opportunity to serve as chair of your group. Your committee or task force service will increase your professional visibility to your employer and other members, which can lead to your recommendation for nomination to the board. The WICPA Nominations Committee reviews applications and resumes submitted annually by members who are nominated to serve on the board. After carefully reviewing member applications and resumes, and the evolving needs of the board, the committee submits nominees for WICPA members to vote on at the annual May membership meeting. Once elected, board members attend three annual board meetings, plus a few other WICPA events during the year such as the Annual Member meeting. Three board members also serve on the AICPA Council where they attend three annual AICPA Council meetings annually. Two of these meetings are out-of-state and last three days, with one regional meeting

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in Chicago lasting one day. Current WICPA Board members serving as AICPA Council members include Dave Christianson, CPA, Karla Blair, CPA and Bob Gruber, CPA, Ph.D. Dave is serving his third board term, having served previously as a board member and later as board chair. Karla is serving her first board term following several years on the WICPA Educational Foundation Board and as chair of the Accounting Examining Board. Bob, WICPA chair-elect, is serving his second board term after previously serving on the WICPA Board and as WICPA Educational Foundation, Inc. president. I strongly encourage you to begin your own path to leadership by joining a WICPA committee or task force. Your service will build leadership and executive skills while you enhance your professional visibility and serve the profession in ways you might not have imagined! Visit http://tinyurl.com/cv3vggx for more information.

Dennis F. Tomorsky, CPA, J.D., CGMA is president & CEO of the Wisconsin Institute of CPAs. Contact him at 262-785-0445 ext. 3014 or dennis@wicpa.org.

The

go-to-TAX

On Balance

January|February 2013

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GURU

Robert S. Keebler, CPA highlights his multifaceted tax and estate planning career

BY CYNTHIA M. HODNETT PHOTOGRAPHY BY JOHN NIENHUIS

nderstanding the ins and outs of tax and estate planning has served Robert S. Keebler, CPA, MST, AEP and partner at Keebler & Associates well during his career. Keebler’s expansive expertise has led to many public speaking opportunities and a solid reputation as an expert in the profession. “If you’re doing a lot of teaching, that means you’re doing a lot of learning,” he said. “So the more you’re forced to learn the new laws and assemble them into a speech, it becomes a part of your skills set.”

Finding an audience Keebler’s foray into public speaking came after he submitted a speech about estate tax to the AICPA Advanced Estate Planning Council in 1993. Shortly thereafter, he was invited to speak at the AICPA Advanced Estate Planning Conference.

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“I remember how overwhelming that day was because I was 32 years old and everyone else was in their 50s and 60s,” he said. “I felt like I was in the deep end of the pool, and I didn’t know how to swim. But I did OK, and they asked me to come back.” Shortly after, Keebler joined Toastmasters. As he became more comfortable in front of an audience, he began receiving more invitations to share his expertise in person and during webinars. Since then, he has spoken at hundreds of national conferences, including several annual WICPA tax conferences. He also has written articles and columns and edited, written or co-written books and treatises on wealth transfer and taxation. He is a contributing author to the American Bar Association’s “The ABA Practical Guide to Estate Planning.”

On Balance

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In 2007, he received the Accredited Estate Planners (Distinguished) Award from the National Association of Estate Planners & Councils. He has been named by CPA Magazine as one of the Top 100 Most Influential Practitioners in the United States and one of the Top 40 Tax Advisors to Know During a Recession. A big part of Keebler’s practice is representing clients before the National Office of the Internal Revenue Service in the private letter ruling process and in estate, gift and income tax examinations and appeals. He has received more than 150 favorable private letter rulings, including several key rulings of “first impression.”

Creating a niche Keebler said taking care of clients’ needs and sharing his knowledge have enriched his career. “When you step back and think, I have an 80 year-old guy who’s worth ‘X-number’ of millions of dollars, and he wants me to help move his wealth to his children. That thought can be overwhelming sometimes,” he said. “They are coming to you with this very important issue that will impact their families. You’re trained to do that. So much of it depends on client relationships, expertise and treating people fairly.” Stephen J. Bigge, CPA, CSEP, a partner at Keebler & Associates, recalls how Keebler helped some of his clients. “A few years back there were many cases where people were duped out of their life savings — by people like Bernie Madoff — and were looking for ways to recover some of their losses,” Bigge said. “Although Bob’s primary specialty is in estate planning and IRA/401(k) planning, Bob immersed himself into the theft loss rules and became a selfeducated expert. Through his efforts, Bob was able to assist clients in recovering some of their losses through filing amended tax returns.” Bigge also recalled meeting Keebler in 2000 through a mutual professor they both

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had as undergraduates at Lakeland College in Sheboygan. Keebler became Bigge’s mentor and eventually hired him to work at the firm in 2010. “Bob has been an outstanding mentor who has developed and honed my professional skills like no one else could,” Bigge said. “Bob has challenged me in many ways (in a good way), and has encouraged and supported me in my endeavors.”

Making moves Keebler’s interest in accounting began in childhood by watching his father, Robert E. Keebler, who was an accountant. The younger Keebler’s interest was piqued when he took an accounting course as an undergraduate at Lakeland College. After graduating from Lakeland, he earned a master’s degree in taxation from the University of Wisconsin–Milwaukee. As a graduate student, he worked as an analyst at The Kohler Co. in Kohler. After earning his master’s degree in 1987, Keebler worked at Price Waterhouse (now PricewaterhouseCoopers LLP) in Milwaukee. While at the firm, he worked on tax returns for Wisconsinbased businesses operating in the United States. In 1992, he moved to Schumacher Romenesko (now Baker Tilly Virchow Krause) in Green Bay where he specialized in individual taxation, and estate and trust. It was there he discovered he preferred estate planning instead of the grind of tax season. As Keebler’s career shifted to estate planning, a large number of workers at Green Bay-area paper companies were retiring with substantial pensions. Many of them later became his clients. “I discovered a niche in retirement distributions because it combined computer modeling with estate tax and income tax,” he said. “But if I was going to help them, I had no choice but to learn about this. It was hard because back in the early 1990s, there weren’t many books that dealt with this.

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[

“If you’re willing to put in the time, hard work and treat people right, good things will usually follow.”

“We didn’t have the Internet where you could go and find it,” he said. “You didn’t know what you were looking for and if you did, you had to read everything in sight and hopefully pull it all together. Part of the success comes when you have real clients with real problems, and you have to figure out a way to help them.” In 2010, Keebler left Baker Tilly and established Keebler & Associates. The firm provides tax advisory, family wealth transfer and preservation planning, charitable giving, retirement distribution planning,

[

and estate administration. As for the future, Keebler doesn’t plan to change his career plans anytime soon. “If you’re willing to put in the time, hard work and treat people right, good things will usually follow,” he said. “If there’s a lesson in all of this, especially for young people, it’s to find your own niche. You will get into your niche by happenstance and acquire the skills that no one else has. If you do that, you’ll always have work.”

COMING IN APRIL

Reading Makes ¢ents

Read-A-Thon Help Wisconsin kids become money smart! Visit the local elementary school of your son, daughter, niece, nephew or neighbor during April, and read to students about the basics of money. Select a book from a recommended reading list or choose your own book with a money-related theme. Borrow a book from your

local library, or purchase a book and leave it with the teacher. WICPA members will receive handouts to bring to class, including information for parents, a piggy bank for students and financial literacy curriculum for teachers. For more information, visit www.wicpa.org/Reading.

In conjunction with Financial Literacy Month,

To pledge your participation,

Money Smart Week and Teach Children to Save Day,

email Mary Murray at

the WICPA will host its fifth Read-A-Thon in April.

www.wicpa.org

mary@wicpa.org.

On Balance

January|February 2013

Going global Mike Lauber, CPA gains a global accounting perspective by volunteering in Brazil

By Cynthia M. Hodnett

magine trading in your office for a week in the

rainforest in Brazil to conduct field research to create

environmentally and economically sustainable practices

for local businesses.

Thatâ&#x20AC;&#x2122;s what Mike Lauber, CPA, an assurance senior at

Ernst & Young in Milwaukee, did last summer. He and nine Ernst & Young employees from the United States, Canada, Mexico and South America worked with researchers from Earthwatch Institute to record and measure data on tree species in Brazil.

They also collected water samples and set up cameras to

track mammals in the Atlantic Forest, one of the worldâ&#x20AC;&#x2122;s

most threatened forests. Their research helps Earthwatch

scientists understand which attributes are most important to manage the forest in the face of climate change. Ernst & Young volunteers also worked closely with a local

ecotourism cooperative to help them improve profitability.

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January|February 2013

www.wicpa.org

Lauber, an employee at Ernst & Young for two years, applied

for the program after reading about it in one of the firm’s

newsletters. He is the first employee from the firm’s Milwaukee office selected for the program.

“Those of us who are CPAs applied our analytical knowledge

to review cash expenditures and income streams, and identify

areas where the cooperative could save money,” he said. “We also

identified new avenues where they could advertise more effectively to help their business grow.

“It was also good to see that my core values of helping

Lauber (midd le near the Guy , grAy shirt) with volunt ra Farm in Gu eers araqueçaba, Brazil

businesses grow ethically and sustainably aligned with the

organization I work for,” he said. “This experience definitely

expanded my global mindset and understanding of different

responsibility for Ernst & Young.

my clients.”

interest in the program and level of environmental commitment.

cultures around the world, which can help me to better serve

Applicants are also required to write an essay describing their

The firm sent 11 employees on the first Earthwatch expedition

in 2009. Ernst & Young has since expanded the program by sending 30 employees in 2012.

strategy, which includes expanding its global presence, minimizing its impact on the environment and enhancing young professionals’

The program has been so successful that it has been expanded

skills, Holmes said. After they return from the trip, participants

from Costa Rica to Brazil, and replicated in the firm’s EMEIA

are encouraged to share their experiences with their colleagues,

area (Europe, the Middle East, India and Africa). In August

she said.

2012, the firm launched the program in the Asia-Pacific area

“The level of interest of our junior employees is profound,”

and, in Japan, small groups of

she said. “Our young employees are looking for skills-based,

professionals participate in

short-duration projects. All of these areas represent high-

leadership volunteer opportunities, and this program allows them to enhance their core skills.”

The firm strives for maximum variety in each class of

growth emerging markets

Ambassadors, deliberately assembling a group that is diverse as to

environmental innovation,

represent the firm’s assurance, advisory, tax and transactions

and are poised for robust

geography, gender, race and ethnicity. For that reason, participants

said Ernst & Young officials.

Eligible applicants must be

employed fulltime at Ernst & Young for at least a year

service lines. Employees in professional support positions,

including information technology and human resources, also participated in the expedition.

“This program sends our employees into countries where

and have earned a high

they don’t speak the language or know a lot about the culture,”

their last annual review, said

skills and network with Ernst & Young employees from our

performance rating in

Deborah Holmes, Americas director of corporate

r h a voluntee it w ) t h ig (r Lauber all in Brazil near waterf

www.wicpa.org

The goals of the program complement the firm’s corporate

she said. “They get the opportunity to build their leadership

different geographies and to interact with those living in different countries. They come back with a global mindset.”

[

CYNTHIA M. HODNETT is editor of On Balance magazine. Contact her at 262-785-0445 ext. 3004 or cynthia@wicpa.org.

On Balance

January|February 2013

kudos Jay D. Adkisson, CPA, a partner in the Health Care Industry Practice of Wipfli LLP in Milwaukee, has been appointed to the American Institute of Certified Public Accountants’ Health Care Expert Panel for 2012–2013.

Kyle J. Ausloos, CPA

Kari A. Apel, CPA has been hired at Smith CPA, LLC in Baraboo, according to the Baraboo News Republic. Kyle J. Ausloos, CPA, accountant at Hawkins, Ash, Baptie in Manitowoc, has earned his Certified Public Accountant license. Jessica Burg has been hired as tax staff accountant at Kolb+Co. SC in Brookfield.

Jessica Burg, CPA

Gail M. Doerflinger, CPA has joined the tax services team at Chortek & Gottschalk in Waukesha.

IRS announces 2013 pension plan limitations

Brian P. McGinnis, CPA has been named vice presidentfinancial operations at ThedaCare in Appleton, according to Appleton Post-Crescent. Roger J. Naniot, CPA, CMA, CIA, CFE, executive vice president and chief financial officer of EMTEQ in New Berlin, has been named The Business Journal of Milwaukee’s CFO of the Year in the medium private companies category. Robert W. Scott, CPA, director of finance/treasurer for the City of Brookfield, has been named The Business Journal of Milwaukee’s CFO of the Year in the government category. Peter J. Sinsky, CPA, chief financial officer of Riley Construction Co. Inc. in Kenosha, has been named The Business Journal of Milwaukee’s CFO of the Year in the medium private companies category. Elizabeth Uecker has been hired as an auditing and accounting staff accountant at Kolb+Co. SC in Brookfield.

Elizabeth Uecker, CPA

On Balance

Report: CPA career opportunities plentiful in 2013

Jeff Lemmermann, CPA, CITP, CISA, CEH has been hired as chief financial officer/chief information officer at Precision Plus Inc. in Elkhorn. Michael G. Lewandowski, CPA, manager at Schenck SC in Milwaukee, celebrated 15 years at the firm recently.

Michael G. Lewandowski, CPA

KMA Accounting Group, SC acquired Bodilly CPAs & Consultants, LLP effective Nov. 1, 2012, according to the Wisconsin State Journal. The combined company is now named KMA Bodilly CPAs & Consultants, SC at 525 Junction Road, Suite 8200 in Madison. All employees from both firms were retained. Leading KMA Bodilly are Chief Executive Officer Jason R. Kadow, CPA and President Cory A. Myers, CPA.

Bryan F. Laabs, CPA has been named partner of CliftonLarsonAllen in Milwaukee.

Chris Konz has been hired as an auditing and accounting staff accountant at Kolb+Co. SC in Brookfield.

Bryan F. Laabs, CPA

Accounting firms complete merger

CPAs with three to six years of experience who want to change jobs will have multiple job offers within weeks, according to Robert Half staffing firm. In addition, CFOs are likely to see an increase of 3.6 percent in starting salary next year, according to Robert Half’s 2013 salary guide. Read more at www.rhi.com/SalaryGuides.

Brian M. Kelley, CPA, MST has been hired as state and local tax senior manager at Kolb+Co. SC in Brookfield.

Brian M. Kelley, CPA, MST

Odd & Ends

Pension plan limitations have changed in 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment, according to a recent report from the Internal Revenue Service. However, other limitations remain the same because the increase in the index doesn’t meet statutory thresholds that trigger their adjustment. Read more at www.irs.gov/uac/2013-Pension-Plan-Limitations.

Survey examines hidden costs of the economy, workplace stress The economy, workplace stress challenges in changing unhealthy lifestyles, and their impact on medical costs and costs associated with absence, presenteeism, overtime and replacement workers are addressed in the survey, “The Pathway to Health and Productivity 2011–2012 Staying@Work™ Survey Report.” Read the survey at http://tinyurl.com/7c3ssth.

January|February 2013

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memorials NORMAN KOSHAKOW, CPA

HARLEY B. SPLITT, CPA

(1919–2012)

(1923–2012)

Norman Koshakow, CPA died Oct. 19, 2012. He was 93. Koshakow earned his Business Administration degree from Marquette University in 1945 and earned his CPA license in 1948. He worked for the Internal Revenue Service for 37 years before retiring as a case manager in 1982. After retirement, he taught income tax/accounting at Milwaukee Area Technical College for several years. The Hot Springs Village, Ark., resident joined the WICPA in 1961.

Harley B. Splitt, CPA died Oct. 16, 2012. He was 89. Splitt entered the U.S. military in 1943. After graduating from the U.S. Army Finance School, he worked in the Army’s finance department, attached to the Air Transport Command of the U.S. Army Air Force in the China-Burma-India Theater of World War II. He earned a Bachelor of Business Administration from the University of Wisconsin-Madison in 1947. He earned his CPA license in 1950. Subsequently, he worked as chief accountant for Fox River Tractor Co., where he was both a member of its board of directors and corporate treasurer. When the company was sold later to Koehring Co., Splitt was retained as the company’s chief finance officer before it was sold to Piper Industries Inc. in 1981. He was promoted later to general manager at Piper Industries until his retirement in 1988. The Appleton resident joined the WICPA in 1951.

HENRY TROIAN RICHARD “DICK” SCHREYER JR., CPA (1940–2012) Henry Troian Richard “Dick” Schreyer Jr., CPA died Oct. 23, 2012, according to the Milwaukee Journal Sentinel. He was 72. Schreyer earned his bachelor’s degree from the College of The Holy Cross in Worcester, Mass., and a Master of Business Administration from Rutgers University in New Brunswick, N.J. He earned his CPA license in 1966. He worked at Ernst &Young for more than 30 years before retiring in 1998 as senior managing partner. The Kilmarnock, Va., resident joined the WICPA in 1986.

MICHAEL M. RUSCH, CPA (1952–2012) Michael M. Rusch, CPA died Oct. 17, 2012, according to the Milwaukee Journal Sentinel. He was 60. Rusch received his bachelor’s and master’s degrees from Marquette University. He earned his CPA license in 1989. Shortly before his death, Rusch was vice president of operations at Brookdale Senior Living in Milwaukee. The Wauwatosa resident joined the WICPA in 1988.

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JACK E. THOMAS, CPA (1918–2012) Jack E. Thomas, CPA died Oct. 27, 2012, according to the Milwaukee Journal Sentinel. He was 94. Thomas earned his bachelor’s and master’s degrees in accounting from the University of Wisconsin–Madison. He later attended Harvard University to become a naval supply officer in World War II. At the end of the war, he served in the Naval Reserves. Afterward, he served for two years in the Korean War before retiring as a commander from the reserves. His accounting career includes a position at the former Arthur Andersen and comptroller of Falk Corp. He also taught adult accounting classes at UW–Milwaukee for 23 years. He served on the Wisconsin Accounting Examining Board from 1965–1978. The Mequon resident joined the WICPA in 1965.

On Balance

January|February 2013

{ Tax | online retailers }

OFF

Proposed federal legislation changes for online retailers By Jennifer H. Jin, J.D.

On Balance

January|February 2013

Online retailers beware! Proposed legislation may impose tax collection obligations in every jurisdiction in which sales occur. Currently, an online retailer must only collect sales tax from customers in a state in which the online retailer has a physical presence. However, there are three federal bills pending before Congress that would authorize states to compel online and catalog retailers (remote sellers), regardless of their location, to collect tax during the transaction. With growing support from both political parties, as well as across industry groups, it is clear that the physical presence rule established by 1992 United States Supreme Court case Quill Corp. v. North Dakota could be soon overturned by Congress.

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The three bills pending before Congress each compel remote sellers to collect tax based on the customer’s location rather than the retailer’s locale, thus eliminating the “physical presence” rule. The bills differ based on how they require states to simplify their collection process.

Main Street Fairness Act Introduced on July 29, 2011, the Main Street Fairness Act authorizes all member states of the Streamlined Sales and Use Tax Agreement to require remote sellers not qualifying for the small seller exception to collect and remit sales and use taxes on remote sales made to customers in their states. One main criticism of the bill is the requirement of membership in the Streamline Sales and Use Tax Agreement, an independent, private nongovernmental body. Partially because of this criticism, the Main Street Fairness Act has stalled. However, this act is important as it lays the foundation for the other two bills that are gaining traction.

Marketplace Equity Act Proposed on Oct. 13, 2011, this bill authorizes states to require all sellers making remote sales to collect and remit sales and use taxes with respect to such sales into the state, without regard to the location of the seller, if such states implement a simplified system for administration of sales and use tax collection for remote sellers. The system would need to include, at a minimum: 1. An exception for remote sellers with gross annual receipts in the preceding calendar year from remote sales not exceeding $1 million in the U.S. or $100,000 in the state 2. A single sales and use tax return for use by remote sellers and a single revenue authority within the state with which remote sellers are required to file a tax return 3. A uniform tax base throughout the state

{ Tax | online retailers }

“

Marketplace Fairness Act Introduced on Nov. 9, 2011, this bill authorizes the state to enforce existing sales and use tax laws and to treat similar sales transactions equally, without regard to the manner in which the sale is transacted. It also allows states to collect, or decide not to collect taxes owed under state law as long as the state adopts the Streamline Sales and Use Tax Agreement or complies with the Marketplace Fairness Act’s own separate tax simplification requirements.

A state that is not a member state under the agreement may require sellers to collect and remit sales and use taxes with respect to remote sales sourced to such state if the state adopts and implements certain minimum simplification requirements, including: 1. Providing a single state agency to administer all sales and use taxes 2. Establishing a uniform sales and use tax base 3. Providing remote sellers 30 days notice of a tax rate change by any locality in the state 4. Providing software and/or other services for managing sales tax compliance 5. Relieving remote sellers from liability to the state or a locality for collection of the incorrect amount of sales or use tax based on information provided by the state Strong bipartisan support and a changed economic and technological environment are the main reasons why remote seller tax reform looks imminent. In Quill, the court invited Congress to pass a national law to outline the extent to which the states can burden remote sellers with a duty to collect use tax. Twenty years later, Congress appears ready to take the court up on its invitation.

Jennifer H. Jin, J.D. is a member of the State & Local Taxation Team at Whyte Hirschboeck Dudek S.C. in Milwaukee. Contact her at 414-978-5314 or jjin@whdlaw.com.

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On Balance

January|February 2013

{ Industry | tax preparers }

TAX RETURN PREPARER PENALTIES:

REALLY? By Deborah K. Rood, CPA, MST

re taxpayers the only ones that can incur penalties? Many tax practitioners may be surprised to discover the answer is “no.” In fact, tax practitioners can be subject to a variety of sanctions, including but not limited to civil penalties, inquiry by the Internal Revenue Service (IRS) Office of Professional Responsibility, and censure, suspension or disbarment from practice before the IRS. While it is rare, the IRS can initiate criminal enforcement actions against preparers in egregious circumstances. Penalties can arise in many forms, and being aware of applicable penalties is a key element in minimizing the risk of imposition of civil monetary sanctions. This article identifies several tax return preparer penalties that the IRS may assess. In addition, some states also impose tax return preparer penalties, including Wisconsin.

Treasury Department Circular No. 230 (Circular 230)

Circular 230 contains the rules governing practice before

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the IRS. After defining the rules of practice, Circular 230 identifies the sanctions for violation of the regulations. Monetary penalties can be imposed on any practitioner if the practitioner is shown to be incompetent or disreputable, fails to comply with Circular 230, or with intent to defraud, willfully and knowingly misleads or threatens a client or prospective client. In some circumstances, practitioners may be censured, suspended or disbarred from practice before the IRS for these behaviors.

Failure to follow procedures

These penalties are for failure to follow simple procedural aspects of preparing tax returns. Penalties include:

$50 penalties for:

• Failure to sign returns • Omission of a taxpayer identification number • Failure to furnish the taxpayer with a copy of the tax return • Failure to retain and make available a copy of prepared returns or list of returns prepared • Failure to retain and make available a list of return preparers • Failure to include a return preparer in the above list

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$500 penalty for a practitioner who endorses or negotiates a taxpayer’s refund check

licensed under s. 442.08 of the Wisconsin statutes is not considered a tax preparer.

Penalties can generally be abated for reasonable cause if there was no willful neglect.

How can a CPA protect against preparer penalties?

shutterstock.com

Understatement of a taxpayer’s liability

If the practitioner takes a tax return position that the practitioner knew or reasonably should have known was unreasonable, a penalty, which is the greater of $1,000 or 50 percent of the income derived by the practitioner from the return may be imposed. If the underpayment is deemed willful or reckless, the penalty increases to the greater of $5,000 or 50 percent of the income derived. The penalty may decrease if the practitioner shows there was reasonable cause for the understatement and the practitioner acted in good faith. A position is treated as unreasonable unless: • There was substantial authority for the position • The position is adequately disclosed and has a reasonable basis • The position relates to a tax shelter or reportable transaction and would more likely than not be sustained on its merits

Lack of due diligence in claiming the Earned Income Tax Credit

The IRS identified the earned income credit as an area where taxpayers have taken abusive tax positions. As such, the IRS has charged tax preparers with a responsibility for carefully reviewing a taxpayer’s qualifications. Practitioners who do not conduct the required due diligence, including completion of Form 8867, Paid Preparer’s Earned Income Credit Checklist or an equivalent, can be charged with a penalty of $500 per violation.

Aiding or abetting in tax liability understatement

If a practitioner is found to be aiding or abetting in an understatement of tax on behalf of a taxpayer, the IRS may impose a penalty of $1,000 or more. This penalty increases to $10,000 if the taxpayer files a corporate tax return.

Most importantly, CPAs should implement a quality control process that includes an independent review of tax returns prepared. If the CPA operates as a sole practitioner, sufficient time should pass between when the return is prepared and when the review occurs to allow for that independent review. The quality control procedures should also ensure that procedural matters such as ensuring that a copy of the return is retained, all taxpayer identification numbers are disclosed, and Form 8867, Paid Preparer’s Earned Income Credit Checklist or an equivalent is included in the work papers as appropriate.

{ Industry | tax preparers }

“Penalties can arise in many forms, and being aware of applicable penalties is a key element in minimizing the risk of imposition of civil monetary sanctions.”

Summary

CPAs are subject to high ethical standards, which are issued by the IRS, the American Institute of Certified Public Accountants and state boards of accountancy in preparing tax returns. The IRS and individual states have imposed tax return preparer penalties to discourage unethical behavior by tax return preparers. However, similar to many laws and regulations designed to prevent unprofessional conduct and abuse, the guidelines are expansive and, on occasion, an inadvertent error can subject a CPA to tax preparer penalties. In these circumstances, the penalties imposed may be greater than the fees derived from the engagement. By implementing quality control procedures that include an independent review, even for a sole practitioner, the exposure related to incurring preparer penalties may be minimized. Deborah K. Rood, CPA, MST is a risk control consulting director at Continental Casualty Company, one of the CNA insurance companies, in Chicago, Ill., and the underwriter of the AICPA Professional Liability Insurance Program. Contact her at 312-822-4523 or Deborah.Rood@cna.com.

Wisconsin tax preparer penalties

Wisconsin imposes a penalty of $200, or twice the pecuniary loss, on tax preparers for each unauthorized disclosure of tax return information. Interestingly, a CPA

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Read Pre-Tax Season Checklist at

http://www.cpai.com/show-article?id=383

On Balance

January|February 2013

{ Fraud | data security }

MANAGING VENDOR DATA SECURITY

and privacy risk of third-party vendors By Jan Hertzberg, QSA, CISA, CISSP, CIPP/IT and Amy L. Henselin, CPA

Routine sharing of critical information assets with cloud providers, consultants, business process outsourcers, third-party transaction processors, and others has become standard business practice. Yet as data moves out of the organizationâ&#x20AC;&#x2122;s protected infrastructure into that of a thirdparty vendor, a certain degree of control is relinquished. Many third-party vendors, which store, process or transmit personally identifiable information/electronic protected health information and intellectual property (IP)

On Balance

January|February 2013

on behalf of users, may not have appropriate controls in place to secure the data, manage risk, or enable users to meet their privacy and security obligations. Even when outsourcing data management and processing activities, regulations require that the user organization retain responsibility for ensuring its data is protected. To manage these risks, user organizations need to carefully vet vendors prior to selection and actively monitor their security and privacy control environments throughout the life of the contract.

What is at risk?

Data breaches resulting from the use of third-party vendors are growing and have become exceedingly expensive to manage and tend to be very expensive to resolve. In the event of a breach, companies may also face fines, civil penalties and legal repercussions. Theft of IP is another growing threat, with yearly losses estimated to be in the billions of dollars. Digital

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Security and compliance

Most organizations must comply with rules and regulations that address the handling of information assets, such as the Payment Card Industry Data Security Standard, the Health Insurance Portability and Accountability Act/Health Information Technology for Economic and Clinical Health Act and others. Many of these rules and regulations apply not only to user organizations that collect the information, but also increasingly to third-party vendors that provide outsourced services. There is also a difference of opinion between cloud providers and users about who is primarily responsible for security in the cloud. This confusion about who is responsible for data security may lead users to become complacent about securing their data, since they may assume their thirdparty vendor has strong security and privacy controls in place — when that vendor may not. Simply put, users need to take a more proactive approach toward ensuring their data is adequately protected.

Have there been any incidences of identity theft experienced by the third-party vendor within the last two years? How are incidents and breaches reported? • Disaster recovery and business continuity planning: Does the third party have a disaster recovery plan? Can we get our data back if the vendor goes out of business? Attestation reports can offer a useful look at a vendor’s security and privacy control environment. However, users must carefully read and thoroughly understand their content and evaluate any findings.

{ Fraud | data security }

technologies and Internet file sharing networks provide the means by which trade secrets, proprietary products, plans and schematics may be stolen. Much of the theft occurs outside the United States, where laws are often lax and more difficult to enforce.

Develop ongoing processes for evaluation and monitoring

“The use of third-party vendors for key business functions has become standard business practice, but the security control environments of vendors vary greatly.”

What can you do to protect yourself?

During the due diligence process, organizations should ask a number of key questions about data security and privacy considerations: • Data protection: How will data be protected? What controls does the vendor have in place for intrusion detection, perimeter security, physical security, timely application of security patches, and data leak prevention, among other safety measures? • Data access: Who will have access to our data, and how can we confirm this? How will the provider ensure that others, e.g., those whose data resides on the same server as ours, are not able to view our data? • Data security: Does the vendor have policies and procedures in place to adequately detect, prevent and mitigate incidences of identity theft that may occur?

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Ultimately, organizations should put in place a consistent process to assess, monitor and manage risks related to vendor operations. Even though many organizations execute vendor agreements with service providers, too few of them build protections into the contract to support an ongoing program to monitor and assess vendor control risks. For example, organizations may insist on a right-to-audit provision that gives them the authority to periodically audit and monitor controls onsite. If the vendor is not willing to allow the provision, consider your options, particularly if an attestation report is not available.

Conclusion

The use of third-party vendors for key business functions has become standard business practice, but the security control environments of vendors vary. It is essential for organizations to be vigilant in assessing risks to their data, even when it resides at a vendor location. Jan Hertzberg, QSA, CISA, CISSP, CIPP/IT is managing director of the Chicago Business Advisory Services Information Technology (BAS IT) Group of Grant Thornton LLP. Contact him at 312-856-0200 or Jan.Hertzberg@us.gt.com. Amy L. Henselin, CPA, is an audit partner for Grant Thornton LLP in Appleton and leader of the Wisconsin Not-for-Profit Practice. Contact her at 920-968-6700 or Amy.Henselin@us.gt.com.

On Balance

January|February 2013

{ Technology | CPE and technology }

An evolution in CPE:

Integrating the tablet,

Wi-Fi and the cloud By John H. Higgins, CPA, CITP

“The convergence of electronic tablets — e.g., Apple’s iPad — and Wi-Fi and cloud computing has enabled the transformation of today’s onsite CPE delivery.”

ontinuing Professional Education (CPE) is a required component of an accounting professional’s life, and today there’s no shortage of online and onsite sessions available.

Both types of CPE learning — face-to-face and Web-based — provide attendees with valuable, timely information required to remain current in areas such as tax law, compliance, client data security and technology. In addition, while online sessions have gained momentum over the past few years based on convenience and affordability, the effectiveness of live onsite learning can’t be overstated. The onsite learning model is a long-standing, tested and proven platform for interactive and rich exchange of information. Unlike online forums, onsite education provides participants with a level of energy and discussion that’s difficult to reproduce in a Webbased environment. Now, with the introduction of a learning model that integrates electronic tablets, Wi-Fi and the cloud into the education process, on-ground CPE is positioned to accelerate participant engagement to a new level.

On Balance

January|February 2013

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Converging technologies and the new learning model The convergence of electronic tablets — e.g., Apple’s iPad — WiFi and cloud computing has enabled the transformation of today’s onsite CPE delivery. Learners no longer need to be saddled with cumbersome manuals. Tablet-based learning eliminates the need for paper and pencils, allowing students to follow a presenter and participate in interactive exercises through a Wi-Fi-powered device. Annotation functionality allows learners to takes notes directly on the tablet. This advanced new CPE model also supports electronic delivery of post-session resources. At the completion of a workshop, students are emailed a link to the course materials, complete with personal notes. The entire learning experience is completely paperless. Also, consider the potential for heightened learner engagement. Working interactively via a hand-held tablet eliminates the need for traditional PowerPoint presentations, which only support one-way discussion: presenter to participants. Tablet learning opens up a world of opportunity to create a far more dynamic learning environment, for example, by including polling questions and interactive charts and graphs within course sessions. In comparison, consider the following example of a traditional CPE workshop experience. An accounting professional attends a typical CPE-based seminar or conference. Chances are high that the presenter facilitates the session using a standard PowerPoint presentation and supplies attendees with paper copies of slides and manuals. Notes are taken manually, and all paper copies are transported back to the practitioner’s office and filed among volumes of other paper, unlikely to be viewed again. This scenario should sound familiar. In fact, it’s too familiar for many accounting professionals, which is why so many have turned to online CPE modules. With the new model firmly in place, tides may turn again, enticing professionals to attend on-site events over Web-based

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sessions. Tablet-based learning takes onsite courses to a new level, pairing the synergy that onsite forums innately offer with advanced technology for learning that is fun, engaging and two-way. The immense value of the new onsite learning model will become more apparent as more practitioners take part in these advanced learning forums. Consider all the benefits: •

Eliminates the need for paper manuals and copies of presentations.

•

Provides learners with convenient electronic versions of annotated course materials for easy retrieval and review.

•

Enables two-way, interactive dialogue during sessions via such features as polling questions.

•

Offers course materials in a high-definition display, supporting vivid, multicolor collateral (also eliminates the high cost of printing color materials).

•

Eliminates capacity restrictions. Presenters can download as much material as needed to tablets.

•

Provides advanced functionality to customize the learner experience. Tablets enable learners to zoom in or out, create bookmarks and links to information, quickly conduct searches for specific information, and take notes using intuitive annotation tools.

For course developers and presenters, this new model eliminates the reliance on paper, and opens the door to many updated features, such as easy implementation of video, audio and Web content. It also expands the shelf life of course materials, allowing real-time updates to materials when needed. For participants, the combination of interactive tools and resources and two-way interaction promises a much richer and engaging learning experience. The new era of onsite CPE learning has begun! John Higgins, CPA, CITP is a strategic adviser for CPA Crossings, LLC in

Rochester, Mich. Contact him at jhiggins@cpacrossings.com.

On Balance

January|February 2013

make an immediate impact. Make an immediate, positive impact on your career when you visit Madison and participate in Wisconsin School of Business Executive Education courses. Youâ&#x20AC;&#x2122;ll learn valuable skills, connect with faculty and real-world business leaders, and quickly add value to your organization. Take a three-day course or earn a professional development certificate in key business areas including: Business Analysis Project Management Advanced Management and Leadership Take the first step toward lifelong learning today at exed.wisc/guide.

On Balance

January|February 2013

www.wicpa.org

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