March|April 2014 | Vol. 10 No. 2 A publication of the Wisconsin Institute of CPAs | www.wicpa.org
Moving forward,
giving back
PLUS:
Tips for running a lean business FRF for SMEs framework update Addressing business traveler’s tax
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A publication of Wisconsin Institute of CPAs | www.wicpa.org
March/April 2014 Vol. 10 No. 2
6 Features
Columns
6 Moving forward, giving back Meghan Gartman, CPA excels at her career and volunteering. By Cynthia M. Hodnett
30 TAX FATCA and foreign account-related tax reporting requirements U.S. taxpayers with foreign accounts face more compliance as more countries agree to implement the Foreign Account Tax Compliance Act. By Jennifer H. Jin, J.D.
10 The AICPA’s Financial Reporting Framework for Small and Medium-Sized Entities Get an update on how the AICPA provides a simplified reporting plan for privately owned businesses. By R.D. Nair, Ph.D., CPA 16 Running lean: How businesses can do more with less These best practices can help small and mediumsized companies operate conservatively and efficiently without sacrificing quality. By Erica G. Knerzer, CPA 19 Big data: From potential obstacle to progress to driver of innovation and growth Highly skilled finance professionals are poised to lead their companies through an increasingly data-driven era. By the AICPA Communications Team
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32 HUMAN RESOURCES U.S. income and Social Security implications of short-term business travelers Temporary business travelers can avoid tax liability with proper tax planning. By Hayden Budds 34 TECHNOLOGY Reducing fraud with technology Technologies such as Excel and Access can play a key role in detecting and preventing fraud. By Thomas G. Stephens Jr., CPA, CITP
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30 Departments 2
Odds & Ends | news briefs
3 Outlook | chair’s letter 5 Spotlight | from the editor 15 In Touch | president & ceo’s message 25 Memorials | departed members 26 Kudos | members in the news 27 Membership Matters | member benefits
On Balance
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Odds & Ends 2013 Apex Award for Publication Excellence
2013-2014 WICPA OFFICERS/BOARD MEMBERS Chair Robert A. Gruber, Ph.D., CPA, CGMA Chair-elect Jean M. Hansen, CPA, MBA, CGMA Past-chair Danica E. Olson, CPA, CGMA Secretary-treasurer Joy L. Hertlein, CPA, CGMA Directors Kyle J. Beld, CPA Greta C. Diercks, CPA Katherine L. Hauser, CPA, MBA, CGMA Kelly K. Miller, CPA Joan M. Phillips, CPA Matthew I. Raunio, CPA Gregory L. Ryan, CPA Carver Smith, CPA Martin D. Verhelst, CPA AICPA Council Nicholas S. Lascari, CPA, CEA, CGMA 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!
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 2014 On Balance.
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Grafton CPA firms merge offices Donahue & Associates LLC, Certified Public Accountants, at 2134 Wisconsin Ave., in Grafton, has merged with John C. Dunfee CPA, S.C. in Grafton. Donahue & Associates LLC continues to operate under the Donahue & Associates name. It has also consolidated its staff and ownership with John C. Dunfee, CPA, S.C.
U.S. workers say Tuesday is most productive Tuesday is the most productive day for most U.S. workers, according to a recent survey (tinyurl.com/rhisurvey) by staffing agency Accountemps. Human resources managers at U.S. companies with 20 or more employees were asked: “In your opinion, on which day of the week are employees generally most productive?” • Tuesday had 39 percent of the vote. • Monday had 24 percent. • Wednesday and “no particular day” each had 14 percent. • Thursday, Friday and “don’t know” all had 3 percent.
Chicago-area firm joins Wipfli Twenty partners and associates of the accounting and business consulting firm, The Condon Group Ltd., in Tinley Park, Ill., have joined Wauwatosa-based Wipfli LLP, according to the Milwaukee Journal Sentinel. Condon Group serves wealthy individuals and privately held companies, particularly those in manufacturing, construction and real estate. As a result of the move, Wipfli now has 22 offices in the United States, plus two in India. Wipfli employs more than 1,200 people.
Poll: More U.S. residents report being worse off financially More people in the United States report they are struggling financially now compared to a year ago, according to a new poll (tinyurl.com/gpoll2014). According to a recent Gallup poll, 42 percent percent say at the start of 2014 they are worse off, compared to 39 percent who said so during the same time last year.
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{ Outlook | chair’s letter } “I’m proud to say that the WICPA uses benchmarking as it was meant to be used — to see what others are doing, adapt what others are doing to serve our members better and establish our internal benchmarks to guide our operating activities and decisions.”
Benchmarking: The sincerest form of flattery
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enchmarking can be defined as “a reference to what someone else is doing well in hopes of either emulating them or being reassured that others are emulating you.” People cannot help comparing themselves to others. It’s human nature. And organizations must compete with other organizations in hopes of distinguishing themselves from their peers. In fact, most well-run entities compete with themselves via budget-to-actual comparisons, periodic performance reviews and continuous updating of their strategic plans. The WICPA is no different. For example: • In addition to reviewing WICPA financial statements quarterly, the institute’s finance committee meets two or three times annually to review and discuss the WICPA’s financial statements, including a comprehensive review of the upcoming budget before recommending it to the full board for approval. • Each month, the board chair and treasurer review the WICPA’s financial statements. • Both the finance committee and educational foundation’s investment committees host quarterly conference calls to review investment policies and performance with the investment advisors. • As a distinct entity, the educational foundation’s separate board of directors meets twice annually to assess the foundation’s financial performance and receive updates from WICPA staff. The WICPA Board of Directors meets three times each year (March, September and December). Two of its most important tasks at these meetings are to review and discuss reports from the WICPA Executive Team regarding strategic activities. For example, at the Dec. 6, 2013, board meeting, the following “strategic plan action steps” were discussed: • Vice President of Communications Amy Gaeth reported on activities that were implemented to enhance the relevancy and value of membership communications, including the WICPA website, On Balance and member surveys. • Vice President of Membership & Marketing Barb Gamez reported on recent retention and recruitment activities, including new recruitment brochure, new member packet and branding designed to increase the awareness of the value of WICPA membership. • Tammy Hofstede, CFO/COO, reported on the search
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for new office space. (The WICPA is moving to a new location in August!) She also reported on the interim financial statements for FY 2013–2014 and the addition of WICPA CPE on-demand programs. • Dennis Tomorsky, president/CEO, provided an update on the Accounting Examining Board’s discussions related to continuing education requirements in the state, competency enhancement research and improving learning effectiveness with expanded learning activities. Benchmarking epitomizes targets, goals, standards and other desirable traits found in external “high achievers.” I’m proud to say that the WICPA uses benchmarking as it was meant to be used — to see what others are doing, adapt what others are doing to serve our members better and establish our internal benchmarks to guide our operating activities and decisions.
Robert A. Gruber, Ph.D., CPA, CGMA is a professor and Master of Professional Accountancy program OnofBalance March|April 2014 coordinator at the University Wisconsin-Whitewater. Contact him at 262-472-5463 or gruberr@uww.edu.
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On Balance
March|April 2014
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{ Spotlight | letter from the editor } “Do you have a mentor who has a made a positive, long-lasting impression on your life? Maybe this person recommended you for a job or gave good advice?”
Making a lasting impression
D
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o you have a mentor who has a made a positive, long-lasting impression on your life? Maybe this person recommended you for a job or gave good
advice? WICPA member Meghan Gartman, CPA fills that role for several University of Wisconsin-Milwaukee accounting graduate students. Gartman, a UWM alumna and a current manager at Ernst & Young LLP in Milwaukee, often mentors accounting students and represents her firm at job fairs on campus. One accounting graduate student, Marco Flagello, worked with Gartman when he interned at Ernst & Young in 2013. “Since our first interaction, I’ve always been impressed with Meghan’s interpersonal skills,” he said. “She is genuinely helpful and available to answer any of my questions. While interning at (the firm), I was able to see firsthand how hard she works and contributes to the firm’s success.” Mentoring future CPAs is one of Gartman’s interests, which she mentioned when I interviewed her several weeks ago for an article in this issue of On Balance. During our conversation, she shared her experiences as a CPA and her role as the coordinator of the Ernst & Young Graduate Accounting Program-Germany. Each year, the program sends several UWM accounting graduate students to study accounting at Justus Liebig University in Giessen, Germany, for two weeks. In addition to academics, the students tour businesses and take cultural excursions to museums and landmarks. Gartman participated in the program in 2008. “It’s a good opportunity for accounting students,” she said. “You’ve learned so much in class. Being able to travel and getting a global view of accounting is a valuable experience.” Gartman also volunteers with several nonprofits, including the Cystic Fibrosis Foundation Wisconsin Chapter. As a volunteer with the foundation, she participated
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in a fundraiser. For her efforts, she was named to the 2013 Milwaukee’s Finest program sponsored by the Cystic Fibrosis Foundation Wisconsin Chapter. The program recognizes young professionals in Milwaukee who demonstrate outstanding leadership within their careers and through community service. In addition to Gartman’s profile, read about accountingrelated topics, including financial reporting framework for small and medium-sized entities and tax procedures for short-term business travelers.
Cynthia M. Hodnett is editor of On Balance magazine. Contact her On Balance 2014 at 262-785-0445 ext. 3004 March|April or cynthia@wicpa.org.
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Moving forward,
giving back
6
On Balance
March|April 2014
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It was because of Meghan’s patience and coaching that I was able to complete a work product that I was proud of.
— Joe Radunzel, CPA
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On Balance
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We’re Moving ….but not too far!
This August, the WICPA will relocate to a new office space just west of its current location. Be sure to update your records with our new address! You’ll find us in the Ruekert-Mielke Building W233N2080 Ridgeview Parkway, Suite 201 Waukesha, WI 53188 ∙ www.wicpa.org
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their facilities, WEDC offers financial assistance, including loans, grants and tax credits. For clients who need to start or expand their export strategy, WEDC’s team of market development directors and in-country trade representatives provide expertise on doing business successfully in many of the world’s fastest growing markets. To learn more about WEDC and our portfolio of customer-centric programs and resources designed to help your clients reach their full potential, call 855-INWIBIZ (toll free), email DoBusiness@InWisconsin.com, or visit InWisconsin.com.
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{ In Touch | president & CEO’s message } “In recognition of these and similar developments relating to learning, competency enhancement and technology, the AICPA’s Future of Accounting Education Task Force, NASBA, and the WICPA are exploring shorter and more diverse activities creditable for CPE.”
Competency enhancement with new learning concepts
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ectures have long represented the most prevalent form of learning. Recent neuroscience research, however, has discovered that many activities transfer knowledge much more effectively than passively sitting through long lectures. Various studies have determined that: 1) adult learners can initially maintain attention to a lecture for no more than 15 to 20 minutes, 2) the attention span decays to 3 or 4 minutes toward the end of a standard lecture, and 3) an individual remembers only 58 percent of information presented after 20 minutes, and after an hour, only 44 percent of the information. Another study determined that “The group with the shortest training sessions (of about 8 minutes) had significantly faster learning in early stages of training than groups with longer sessions. In later stages, the group with the longest training sessions (more than 1 hour) showed slower learning than the other groups.” In July 2012, the International Accounting Education Standards Board (IAESB) issued International Education Standard (IES) 7 Continuing Professional Development (CPD) which provides the following examples of learning activities that may be undertaken as part of a planned program of CPD activity: a) Participation in courses, conferences, and seminars. b) Self-directed learning. c) On-the-job training. d) Participation in and work on technical committees. e) Developing or delivering a course or CPD session in an area related to professional responsibilities. f) Formal study related to professional responsibilities. g) Participation as a speaker in conferences, briefing sessions, or discussion groups. h) Writing articles, papers, or books of a technical, professional, or academic nature. i) Research, including reading professional literature or journals, for application in the professional accountant’s role.
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j) Professional re-examination or formal testing. k) Providing professional development support as a mentor or coach. l) Receiving professional development support from a mentor or coach. In recognition of these and similar developments relating to learning, competency enhancement and technology, the AICPA’s Future of Accounting Education Task Force, NASBA, and the WICPA are exploring shorter and more diverse activities creditable for CPE. In addition, the WICPA Board of Directors established a Competency Enhancement Task Force in December 2013 to review and recommend updates to CPE requirements for WICPA membership. The task force plans to establish processes during the next year that will evaluate shorter time increments and the possibility of expanded types of creditable learning activities to be considered for WICPA membership.
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.
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RUNNING LEAN:
HOW BUSINESSES CAN
Do more with less BY ERICA G. KNERZER, CPA
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On Balance
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www.wicpa.org
he great news for small to medium-sized businesses is that the economy
T
is rebounding. However, businesses are still facing many challenges including constantly changing regulations and fewer resources.
After experiencing the sting of the economic recession,
time getting to know them. Plus, in many instances, this
many businesses are continuing to exercise more
can carry more weight than elaborate employee benefit
conservative practices with the resources they have.
packages that some larger businesses can offer, while
They want to continue to run lean, as they did during
small to medium-sized companies cannot.
the downturn, and stay competitive in their respective industries. Despite wanting to save on personnel expenses,
Another risk of having employees overbooked in their workloads is that it leaves little time for sales and marketing and for the innovation of new business
businesses should be cautious with stretching their
ideas. If employees get too caught up in doing their
workforces too thin. A lot of companies have trouble
daily tasks, the company may end up suffering from lack
finding quality staff who are the right fit, so it is more
of innovation to keep the company fresh and current.
important than ever to work on retaining their productive
This may lead to pushing marketing efforts aside and
staff. Having employees wear many hats in the operation
ultimately losing competitive advantage and market
can be a great way to help the budget, and it can also
share. In today’s world of rapidly changing technologies
be a beneficial way for one to learn many aspects of the
and increased use of social media, it is imperative to keep
business, as well as help transition into higher leadership
current in order to see what reaches your markets and
roles. However, burnout becomes a large risk. Many
customer base. Proper use of technology can prove to be
people strive to attain a good work-life balance.
a great time saver for businesses and a great marketing
Business leaders should get to know their employees,
tool.
learn their work styles and what motivates them. The
Finding trusted advisors can be crucial to the success
result could ensure long-term retention and employee
of a business. It is impractical to expect employees to be
satisfaction. For some, satisfaction may be achieved
at the forefront on all of the numerous complexities out
by the promise of growth opportunities and by getting
there in current regulations — from the Affordable Care
involved in many facets of the business. In this case,
Act, to payroll tax laws, and repairs and maintenance
supervisors may choose to put employees with senior
capitalization requirements. It can be cost-detrimental
mentors to learn more aspects of the business and to find
for a company not to partner with strong consultants
out what they need to do to advance.
in various areas (such as insurance companies, payroll
For others, it may be a flexible work environment.
processors, and certified public accountants).
For these employees, figure out how the company can
Hiring consultants is not a sign of defeat. This third-
be flexible with work hours or work-from-home type
party partnership not only allows for a partnership with
opportunities that don’t compromise the business.
those that specialize in complex regulations, but also
Employees will appreciate their employer taking the
allows businesses the time needed to work on growing
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the business. Sitting down with a CPA to do tax planning
Despite the improving economy, lenders are also
can save a company a lot of money by advising the
exercising caution, which can make it difficult for
company when to purchase capital assets and when to
businesses to find adequate capital. Budgeting can
pay bonuses or distributions. Third-party advisors can
be a helpful tool in monitoring funds. Employers
also help with marketing efforts and human resource
should consider having an open line of communication
processes.
with employees on budget goals. Effective and
Just as with hiring an employee for your company,
proper educating of employees on goals and open
similar caution should be taken when hiring a third party
communication can help them realize consequences
advisor. Do your research. Ask around for referrals, check
of their actions and how certain things can save the
references, and interview your advisor. How quickly are
company money and aid in growth. The key to optimal
they able to respond to your needs? Can they explain
performance is the right combination of empowering your
things to your staff in a way in which they will understand
engaged work staff, implementing process improvement
and be comfortable with making business decisions? Do
and utilizing the expertise of consultants.
to improve your bottom line? Will they help make the company more efficient?
Erica G. Knerzer, CPA is an audit manager at Hawkins Ash CPAs in La Crosse. Contact her at 608-793-3113 or eknerzer@hawkinsashcpas.com.
GR WTH It’s what CGMA stands for. Officially, of course, it’s Chartered Global Management Accountant. A new designation representing accomplished professionals that drive and deliver business success, worldwide. Find out more at cgma.org
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Copyright © 2012 American Institute of CPAs. All rights reserved.
your personalities work well together? Will they help you
www.wicpa.org 1/30/12 11:16 AM
By the AICPA Communications Team
orporate leaders are
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continuing to see extraordinary organizational changes that
are bringing new focus, meaning and value to their operations, competitive position and overall success. Nowhere is change being felt more strongly than in how data — in record amounts — is being received, analyzed and unlocked to achieve commercial advantage, and for finance professionals,
exciting career prospects. www.wicpa.org
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In fact, finance’s ability to
is done over the next decade. Plus, 51 percent ranked big data
transform insights into
and analytics as a top 10 corporate priority. Also, more than 90
performance, opportunities and risks has risen so dramatically that
helping organizations benefit from data projects. The need has therefore never been stronger for finance
it has transformed large volumes
teams to recognize the impact of data on the finance
of information from being a
function, the benefits of innovative approaches to data
potential obstacle to progress to a driver of innovation and growth. To learn more about the critical role finance can play in helping organizations benefit from the burgeoning amount of available data and how big data can be integrated into corporate reporting, the American Institute of CPAs (AICPA) and Chartered Institute of Management Accountants (CIMA) have issued a Chartered Global Management Accountant® (CGMA®) report, “From insight to impact: The role of finance in a data-centric world.” The report draws on research performed by the AICPA and
analytics and their own expanded role in the organization. For example, at Yahoo, it has long been necessary for the finance function to understand the data captured by the company’s key products, such as Yahoo mail, in order to genuinely comprehend revenue drivers. The latest CGMA report discusses insights that can help guide finance professionals in these and other key leadership areas. The following are among those featured in the report: • Data-driven decision-making brings greater productivity, value, efficiencies and new KPIs, among other benefits, that cross organization size, type and industry. • More than 90 percent of survey respondents agree
CIMA, including a 2013 survey of nearly 2,100 CFOs and other
that finance is well positioned to help translate data
finance executives from a broad range of business sectors
into commercial insights and value. Although some
across more than 80 countries. The report also reflects the
uncertainty prevails over their specific role, finance
expert knowledge and experiences shared during a series of interviews with senior finance leaders at organizations ranging from Accenture to Google.
Rise of a data-centric organization The momentum toward a data-driven business environment is showing no sign of slowing down, with nearly nine out of 10 (87 percent) surveyed finance professionals agreeing that it has the potential to change the way business
20
percent of CGMAs believe that finance has an essential role in
On Balance
March|April 2014
can add value by applying their expertise to planning, budgeting, forecasting, performance management and other areas. • Delivering on data’s value potential raises the importance of strong finance-business teamwork, and requires that finance executives master management skills, such as communications and the ability to lead and influence, and have a strategic understanding of the business. • The data-enabled era creates new opportunities for finance team members through the development of
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additional skills and competencies. These opportunities
• SMEs can use affordable online and cloud-based
are most appealing to those interested in a more strategic
specialist software and services such as Google Analytics
organizational role. According to 85 percent of survey
and Kaggle to help analyze data.
participants, increasing their ability to work with big data enhances their employability. • There is a steep learning curve for organizations as they use data for commercial benefit, with 86 percent of survey respondents struggling to obtain valuable insight
• More adventurous SMEs are tapping into the capabilities of advanced data scientists to optimize big data opportunities, even without the budgets or capabilities to bring these resources in-house. • The key to success for organizations of all sizes is
from data. Top obstacles include organizational data silos
to develop clear objectives for data projects before
and data-quality challenges.
selecting the tools or services that are best aligned to
Additional insights are shared in the report by Matthew Keylock, global capability managing director of data at
organizational goals. Google illustrates another benefit that big data presents
DunnHumby, a worldwide data-science company. Keylock
to SMEs — advertising opportunities. After years of
advises that organizations first assess their own data sources
focusing on larger advertisers that had significant budgets,
and use them as the foundation on which to build a data
Google expanded its focus and used analytics to gain an
project. Data can include customer contact information,
understanding of the factors that drive SMEs. The result is
organization details and roles, and historical engagement
that SMEs have become one of Google’s fastest-growing
data such as purchased products and services. He also
segments.
recommends that data projects be implemented in phases
New leadership role
and built on individual successes.
Benefits to small and medium enterprises Benefiting from new data insights is as much an opportunity for small and medium enterprises (SMEs) as it is for large enterprises. For example, although SMEs usually have limited resources and budgets, they typically have a more flexible IT infrastructure with fewer legacy system issues or disparate databases. Additionally, they can change practices quickly. The report also reveals that: • SMEs understand the value of big data and are less likely to be deterred by cost.
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As finance team members help lead their organizations through an increasingly data-driven business era, challenges will arise that will stretch their skills into unfamiliar service and functional areas. However, finance professionals have successfully distinguished themselves with a history of evolving their roles and ways of thinking to meet new demands, opportunities, and economic and industry conditions. This history, combined with their drive to acquire new skills and expertise, positions them as potential leaders in harnessing data for greater organizational value and longterm success. CGMA designation holders can download “From insight to impact: The role of finance in a data-centric world” from CGMA.org. Not a CGMA designation holder? Visit Become a CGMA to learn more.
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Whether you’re looking for a new career or a new employee, the WICPA’s enhanced Career Center can help you make the most of your search.
You’ll find: • • • •
Modern layout. Better organized content. Easy access to find or post jobs. Optimal mobile viewing experience.
Sign in today to post your resume or job and find useful resources to help you with your search.
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at the NEW WICPA CAREER CENTER
FIND A JOB POST A JOB
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memorials Daniel J. Biwan, CPA (1962–2013) Daniel J. Biwan, CPA died Dec. 2, 2013, according to the Sheboygan Press. He was 51. In 1985, Biwan earned a Bachelor of Business Administration from the University of Notre Dame in South Bend, Ind. He earned his certified public accounting license in 1986. He later worked for several accounting firms including Biwan & Biwan, S.C., in Sheboygan. In 2001, he acquired his Minocqua-based firm, Daniel J. Biwan CPA Inc. The Woodruff resident joined the WICPA in 1991.
David J. Brown, CPA (1937–2013) David J. Brown, CPA died Oct. 22, 2013, according to the Cedarburg News Graphic. He was 76. Brown majored in accounting at the University of Wisconsin-Milwaukee. He earned his certified public accounting license in 1963. The Cedarburg resident joined the WICPA in 1984.
Arthur K. Gnewuch, CPA (1939–2013) Arthur K. Gnewuch, CPA died Dec. 10, 2013, according to the Green Bay Press-Gazette. He was 74. He attended the University of Michigan in Ann Arbor, Mich., and later graduated from the University of Wisconsin-Madison. He earned his certified public accounting license in 1970. He worked as a CPA for more than 40 years in Green Bay and De Pere. The Green Bay resident joined the WICPA in 1972.
Conrad A. “Ole” Oleson, CPA (1935–2013) Conrad A. “Ole” Oleson, CPA died Dec. 7, 2013, according to the Milwaukee Journal Sentinel. He was 78. Oleson was a U.S. Navy veteran and worked for many years as a CPA for the State of Wisconsin in Madison. He earned his certified public accounting license in 1966. The Madison resident joined the WICPA in 1979.
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kudos
Eric S. Aronson, CPA
Ronald J. Altenburg, CPA, a shareholder at Schenck SC in Appleton, recently celebrated his 25th anniversary at the firm.
Meghan E. Kuehnl, CPA was recently promoted to senior accountant at Schenck SC in Fond du Lac.
Eric S. Aronson, CPA was recently promoted to audit manager at Schenck SC in Appleton.
Jessica A. Lee, CPA was recently promoted to supervisor at Schenck SC in Fond du Lac.
Maksim Artemchik was recently hired as a bookkeeper at RitzHolman CPAs in Milwaukee. Brent T. Engelsma, CPA, a manager at Schenck SC in Sheboygan, recently celebrated his 10th anniversary at the firm. Brent T. Engelsma, CPA
Robert J. Foulks Jr., CPA, CGMA, CAE, IOM, deputy chief operating officer of the Wisconsin Medical Society, was appointed chairman of the National Board of Trustees for U.S. Chamber of Commerce Foundation’s Institute for Organization Management. Jeremy J. Fromm, CPA was recently hired at Ronald J. Langenfeld, CPA, S.C. in Kiel, according to the Tri-County News.
Christopher J. Handrick, CPA
Jeremiah C. Gamble, CPA was recently promoted to supervisor at Schenck SC in Oshkosh. Jessica B. Gatzke, CPA, MST was recently promoted to senior manager at Scribner Cohen & Company in Milwaukee.
Michelle R. Mulloy, CPA
Christopher J. Handrick, CPA, audit shareholder at Schenck SC in Green Bay, recently celebrated his 10th anniversary at the firm. Sheri L. Haugly, CPA, associate accountant IV at Schenck SC in Fond du Lac, recently celebrated her 15th anniversary at the firm.
Janean A. Robenhorst, CPA John F. Prophet, CPA
Nicholas J. Heckenkamp was recently hired as a staff accountant in tax and audit at Vrakas/Blum, S.C. in Brookfield. Mary K. Hintz, CPA, CVA was recently promoted to manager at Scribner Cohen & Company in Milwaukee. Melinda L. Holzberger was recently hired as a staff accountant in tax and audit at Vrakas/Blum, S.C. Brookfield.
Bryan J. Lehner, CPA was recently promoted to senior accountant at Schenck SC in Fond du Lac. Travis J. Lohse, CPA was recently promoted to manager at Scribner Cohen & Company in Milwaukee. Michelle R. Mulloy, CPA was recently promoted to manager at Schenck SC in Green Bay. John F. Prophet, CPA, a shareholder at Schenck SC in Appleton, recently celebrated his fifth anniversary at the firm. Danielle M. Pawlik was recently hired as a staff accountant in tax and audit at Vrakas/Blum, S.C. in Brookfield. Steven P. Rajek, CPA, a shareholder at Schenck SC in Wausau, recently celebrated his 30th anniversary at the firm. Michael J. Stratman, CPA, manager at Schenck SC in Green Bay, recently celebrated his 10th anniversary at the firm. Kyle R. Stephens, CPA was recently promoted to senior accountant at Scribner Cohen & Company in Milwaukee. Murtiyati Sutanto was recently hired as a senior accountant at RitzHolman CPAs in Milwaukee. Mark G. Vance, CPA, tax manager at Schenck SC in Milwaukee, recently celebrated his 15th anniversary at the firm. Holly R. Zander, CPA was recently hired as a senior accountant at Honkamp Krueger & Company in Waunakee, according to the Waunakee Tribune.
Steven P. Rajek, CPA
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MembershipMatters IT’S TIME TO RENEW; SO WHAT DOES THAT MEAN FOR YOU? re•new [ri-noo, -nyoo] verb 1. to begin or take up again 2. to make effective for an additional period: to renew a lease. 3. to restore or replenish: to renew a stock of goods. 4. to revive; reestablish. As we come to the end of the WICPA’s fiscal year on April 30, 2014, membership dues renewal invoices will be mailed in the next few weeks. When you receive your dues statement, I encourage you to reflect on the ways you benefit from being a WICPA member. Here are a few to get you started.
STAND OUT By renewing your WICPA membership, you’re not only “making effective for an additional period” your affiliation with the WICPA. You’re also reaffirming your credibility by letting employers, clients, peers and the community know you are committed to the highest levels of professionalism and integrity.
STAND TALL You can feel confident knowing you are a member of the premier organization for your profession in Wisconsin. Renewing your membership reestablishes your dedication to the profession. You let others know you are part of an elite group of accounting professionals.
STEADILY ADVANCE As a WICPA member, you have many opportunities to enhance your professional knowledge that you won’t find anywhere else. From our peer-driven publications to the highest quality continuing education and leadership development tools, renewing your membership replenishes those resources essential to advancing your career. GAIN ACCESS Then there are the tangible perks of being a WICPA member. Your membership offers access to a variety of business-critical products and services that can save you up to 40 percent. From discounts on business and personal insurance to payroll, shipping, financial and human resource services, the WICPA carefully selects and negotiates significant savings to help you save time and money. If you remember only one thing when it comes time to renew your membership, remember this: that when you’re a member of the WICPA, you’re part of The Standard Above™, providing you with the unique advantages necessary to soar to new heights throughout your career.
Free account with SecureSend, allows you to send large electronic files securely. Visit www.wicpa.org/memberbenefits, under the “Save Time and Money” section for the link to SecureSend.
COMING IN APRIL
Reading Makes ¢ents
Read-A-Thon
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 prize 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 sixth Read-A-Thon in April.
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istockphoto.com
Help Wisconsin kids become money smart! Visit the local elementary school of your son, daughter, niece, nephew or neighbor during the month of 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
mary@wicpa.org.
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27
2014
Escape to
Excellence
Escape with us on a journey to discover how your peers are pursuing and achieving excellence throughout the profession. Join us for a night of celebration to: • Honor our 2014 WICPA Excellence Awards recipients for their commitment and dedication. • Recognize and thank our 10, 25 and 40-year members for their membership longevity. • Elect the WICPA Board of Directors for their leadership and service.
This inspirational event is for all members, including YOU!
HONOREES
10-year members 25-year membe
(2003–2013)
rs (1988–2013) 40-year membe rs (1973–2013) Excellence Awards Recipients WICPA Board of D irectors
R e gi s ter t o d a y !
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The things we care about the most are the things we
just can’t afford to lose.
Most of us are looking to save money any way we can. Especially on things we can’t even see. Like insurance. But inferior insurance is just plain useless. That’s why West Bend’s Home and Highway® policy makes sense. Not only does it protect just about everything you own, you also get great benefits like our Claim Free Award. If you don’t have a claim on your policy all year, you’ll get a portion of your annual premium back – in cash! You even get a special discount for being a member of the WICPA. And it’s all backed by the knowledge and experience of an independent insurance agent.
West Bend. Insurance you buy when you can’t afford anything less. To find out more, contact the official supplier of the Silver Lining®.
Professional Insurance Programs at 414-277-0154 or info@insuranceformembers.net www.wicpa.org
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{ Tax | Foreign Account Tax Compliance Act }
“The increased number of participating countries will dramatically increase the disclosures of U.S.-owned foreign accounts by FFI. Therefore, it is vital to ensure all foreign bank and financial accounts are identified and appropriately reported.”
FATCA and foreign account-related tax reporting requirements By Jennifer H. Jin, J.D.
F
ourteen countries signed bilateral agreements with the United States in 2013 to implement the Foreign Account Tax Compliance Act (FATCA), tripling the number of cooperating countries. Pursuant to FATCA, participating foreign financial institutions (FFIs) must enter into agreements with the Internal Revenue Service (IRS) to: • Identify financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. • Report certain information to the IRS regarding U.S. accounts. • Withhold a 30 percent tax on certain U.S.-connected payments to non-participating FFIs and account holders who are unwilling to provide the required information.
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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The increased number of participating countries will dramatically increase the disclosures of U.S.-owned foreign accounts by FFI. Therefore, it is vital to ensure all foreign bank and financial accounts are identified and appropriately reported. For further information regarding the reporting requirements, see the accompanying chart. Taxpayers who have not appropriately disclosed foreign bank and financial accounts in earlier tax years should consider the IRS Offshore Voluntary Disclosure Program.
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{ Tax | Foreign Account Tax Compliance Act }
Individual taxpayer reporting requirements under Form 8938 and FBAR Source: tinyurl.com/form8938 Form 8938, Statement of Specified Foreign Financial Assets
FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR)
Who must file?
Specified individuals, including U.S. citizens, resident aliens and certain nonresident aliens
U.S. persons including U.S. citizens, resident aliens, trusts, estates and domestic entities
Include U.S. territories?
No
Yes, resident aliens of U.S. territories and U.S. territory entities are subject to FBAR
Reporting threshold (total value of assets)
$50,000 on the last day of tax year or $75,000 at any time during tax year (higher threshold amounts apply to married individuals filing jointly and individuals living abroad)
$10,000 at any time during the calendar year
When do you have an interest in an account or asset?
If any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or asset are or would be required to be reported on income tax return
Financial interest: owner of record or holder of legal title; owner of record or holder of legal title is your agent or representative; or you have sufficient interest in the entity that is the owner of record or holder of legal title
What is reported?
Maximum value of specified foreign financial assets, including financial accounts with foreign financial institutions and certain other foreign non-account investment assets
Maximum value of financial accounts maintained by financial institution physically located in foreign country
How are maximum account or asset values determined and reported?
Fair market value in U.S. dollars in accord with Form 8938 instructions for each account and asset reported
Convert and report in U.S. dollars using the end of taxable year exchange rate
Use periodic account statements to determine the maximum value in the currency of the account
Signature authority: Authority to control the disposition of assets in account by direct communication with the financial institution maintaining the account
Convert and report in U.S. dollars When due?
By due date, including extension, if any, for income tax return
By June 30
Where to file?
With income tax return
Electronically through FinCENs BSA E-Filing System. FBAR is not filed with federal tax return
Penalties
Up to $10,000 for failure to disclose and an additional $10,000 for each 30 days of non-filing after IRS notice of failure to disclose; maximum penalty of $60,000; criminal penalties may also apply
If non-willful, up to $10,000. If willful, up to $100,000 or 50 percent of account balances; criminal penalties may also apply
Financial (deposit and custodial) accounts held at foreign financial institutions
Yes
Yes
Financial account held at foreign branch of a U.S. financial institution
No
Yes
Financial account held at U.S. branch of a foreign financial institution
No
No
Foreign financial account for which you have signature authority
No
Yes, subject to exceptions
Foreign stock or securities held in financial account at foreign financial institution
The account itself is subject to reporting, but the contents of the account do not have to be reported separately
The account itself is subject to reporting, but the contents of the account do not have to be reported separately
Foreign stock or securities not held in financial account
Yes
No
Foreign partnership interests
Yes
No
Indirect interests in foreign financial assets through an entity
No
Yes, if sufficient ownership or beneficial interest
Foreign mutual funds
Yes
Yes
Foreign accounts and foreign non-account investment assets held by foreign or domestic grantor trust for which you are the grantor
Yes, as to both foreign accounts and foreign nonaccount investment assets
Yes, as to foreign accounts
Foreign-issued life insurance or annuity contract with cash value
Yes
Yes
Foreign hedge funds and foreign private equity funds
Yes
No
Foreign real estate held directly or through foreign entity
No
No
Personal property held directly, such as foreign currency, precious metals, art, antiques, jewelry, cars and other collectibles
No
No
Types of foreign assets and whether they are reportable
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By Hayden Budds, FIDAL Direction Internationale, Paris (Fidal is an independent legal entity that is separate from KPMG International and KPMG International member firms)
U
.S. nonresident alien individuals are not subject to U.S. income tax on their worldwide income. Instead, the U.S. taxes the income of nonresidents under two different tax regimes. One regime imposes a 30 percent tax on the gross amount of certain U.S. source income not effectively connected with a U.S. trade or business. The second regime applies regular graduated tax rates to the taxpayer’s net income that is effectively connected with a U.S. trade or business. Business visitors with no U.S. source investment income are only subject to U.S. income tax with respect to their income attributable to services performed in the United States. U.S. Social Security tax is imposed in the following circumstances: • Any person (U.S. citizen, resident alien, or nonresident alien) performs services within the United States. • A U.S. citizen or resident performs services outside the United States for an American employer. • Regardless where and by whom performed, services that are recognized as equivalent to employment under a totalization agreement. An employee is “any individual who has the status of an employee under the common law rules.”1 There are two types of bilateral tax agreements that provide relief from income and Social Security taxation for employees; these are income tax treaties and totalization agreements, respectively. If an income tax treaty exists between two countries, the employee may qualify for an income tax exemption in the country where the services are performed. The eligibility for double tax relief on wage income is usually
I.R.C. § 3121(d)(2). See, e.g., Rev. Rul. 87-41, 1987-1 C.B. 296. See also Adair v. Commissioner, T.C. Memo. 1995-493, for discussion of employment status and identity of the employer.
1
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shutterstock.com
{ Human resources | business traveler’s tax }
U.S. income and Social Security implications of short-term business travelers
{ Human resources | business traveler’s tax }
detailed in the Dependent Personal Services article (or Income from Employment article in newer treaties). The criteria vary from agreement to agreement, such as the number of days an individual can be present in the host country, and the residence of the entity that bears the wage cost. It is important to understand the requirements detailed in each individual treaty. If requirements are not met exactly, the employee will not be able to qualify for exemption. The Social Security equivalent of an income tax treaty is a totalization agreement. Totalization agreements serve two main purposes: to provide relief from dual-country social taxation and to help fill gaps in benefit protection for workers who have divided their careers between multiple countries.
on a B-1 visa. Since this visa does not grant work authorization, these individuals are ineligible to obtain a SSN. Instead these individuals must obtain an Individual Taxpayer Identification Number (ITIN). There are important differences between the SSN and an ITIN. While it is acceptable to file a U.S. individual income tax return using the ITIN, for employer reporting purposes (Form W-2), the use of an ITIN is not permitted. Failure to provide a valid SSN on Form W-2 may result in employer penalties. Absent the SSN, it is difficult if not impossible for the SSA to track periods of coverage. As a result, such employees may lose potential quarters of coverage if they return to the United States later with valid work authorization. Employers of short-term business travelers working in the United States — even when these employees have Social Security tax exemptions under the relevant Social Security totalization agreement — may not be able to comply with the requirement to provide a valid SSN on the W-2 and thus may be subject to penalties for failure to file a correct Form W-2. The income and Social Security tax issues for short-term business travelers depend upon the home and host countries’ income The standard rule of totalization “The income and Social Security and social tax treaty networks. Each agreements is territorial, that is, an individual is subject to Social Security tax issues for short-term business country pair should be evaluated taxes only in the country where he/ travelers depend upon the home separately to determine whether an she is working. However, all of the exemption from either or both taxes and host countries’ income and totalization agreements with the exists. If not, it will be necessary to social tax treaty networks.” United States, except the one with develop a strategy to address these Italy, include a detached worker issues. exception whereby an employee ANY TAX ADVICE IN THIS COMMUNICATION IS remains subject to social tax only in his/her home country. (The NOT INTENDED OR WRITTEN BY KPMG TO BE USED, Italian agreement is based on nationality.) The detached worker AND CANNOT BE USED, BY A CLIENT OR ANY OTHER exception is generally applicable if the employee is expected to be PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING in the host country for less than five years. To qualify for relief, the PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER employee must also remain employed by the sending employer or a section 3121(l) affiliate; i.e., the employee cannot be hired locally. OR (ii) PROMOTING, MARKETING OR RECOMMENDING Absent a totalization agreement, even employees with one day of TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. You (and your employees, representatives, or agents) may productive activity in the United States will create a Social Security disclose to any and all persons, without limitation, the tax obligation; employers with an income or social tax withholding obligation with respect to a business traveler are generally required treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not to issue Forms W-2 for those employees. There is no exception for limited to, any tax opinions, memoranda, or other tax analyses foreign employers. contained in those materials. To track income and Social Security tax obligations, the Social The information contained herein is of a general nature and Security Administration (SSA) issues Social Security numbers based on authorities that are subject to change. Applicability of the (SSNs) to individuals with valid work authorization — for information to specific situations should be determined through example H-1b, L-1, and J visas. The employee should apply for a SSN immediately after arrival in the United States; failure to obtain consultation with your tax adviser. This article represents the views of the author(s) only, and does not necessarily represent the one can lead to complicated reporting issues. Individuals who views or professional advice of KPMG LLP. come to the United States on short-term business trips often enter
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33
By Thomas G. Stephens Jr., CPA, CITP
T
Fraud continues to run at epidemic levels in the United States and other countries. This article will
provide some guidance for using tools already owned, namely Microsoft Office Excel and Access to help you detect fraud and reclaim some profits that may be walking out the door.
Uncovering financial statement fraud One of the more expensive types of frauds committed is that of financial statement fraud. These frauds can be committed using any number of techniques, including recording fraudulent journal entries. Common characteristics of fraudulent journal entries include those in round dollar amounts and those entered on weekends. In Figure 1, selected fields from the Journal
“
Remember, with fraud running at epidemic levels, using technology to prevent and detect fraud can provide an immediate positive impact on your bottom line.
”
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table have been extracted into an Excel Table from a company’s accounting database. Two calculated fields are used to identify transactions in round dollar amounts and those transactions entered on Saturday or Sunday. After creating the formulas, the results can be filtered to identify specific transactions of interest.
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{ Technology | fraud and Excel, Access, Benford’s Law }
Reducing fraud with technology
he statistics are everywhere and they are startling.
{ Technology | fraud and Excel, Access, Benford’s Law }
Figure 1: Identifying suspicious journal entries
One formula uses the WEEKDAY function to identify
these cases, the person committing the fraud will
the day of the week that the journal entry was recorded.
request a refund and then intercept and negotiate the
Transactions entered on Saturday or Sunday evaluate
refund check. Microsoft Access has a query wizard for
to “7” and “1” respectively. The other formula uses the
identifying duplicate values in a field or across multiple
MOD function to calculate the remainder of the debit
fields. This feature can be very effective in identifying
amount divided by 1,000. Transactions entered in even
potential duplicate transactions, such as duplicate
$1,000 amounts generate a result of “0.”
payments of the same invoice. To begin the process,
Finding duplicate payments Another way that fraudsters may commit a billing scheme fraud is to make multiple payments on a valid
select Create, Query Wizard from the ribbon. In the New Query dialog box, select Duplicate Query Wizard and then click OK, as shown in Figure 2. Next, select the source data to query. Once the
invoice. Generally, when a legitimate vendor receives
data source has been chosen, select the field or fields
a duplicate payment, they notify the customer and ask
containing possible duplicate values, and then select
how the duplicate payment is to be handled. In
any additional fields to be displayed in the query results. Choose to display all fields in the results, name the query for future recall and click Finish to view the results.
Using the ActiveData Add-in for Excel ActiveData is an add-in for Excel that uses predefined automated processes to overcome the general lack of user knowledge and skill required to perform sophisticated fraud analysis in Excel. For example, ActiveData can be used to stratify data easily, which is an effective technique for identifying areas of risk. Select Strata from the ActiveData tab, define the stratification bands, and then click Stratify. Click Finished to write the results along with a chart to a new sheet in the workbook, as shown in Figure 3. In this case, though 55.89 percent of all transactions are below $1,000, 91.67 percent of the financial risk is borne by Figure 2: Find duplicates Query Wizard in Microsoft Access
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transactions in the $1,000 to $20,000 strata.
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35
{ Technology | fraud and Excel, Access, Benford’s Law }
that do not fit expected norms. ActiveData provides an automated process for applying Benford’s Law. Begin the analysis by selecting ActiveData, Digital Analysis to open the Digital Analysis Using Benford’s Law dialog box. In the dialog box, select InvoiceAmount as the Column to Analyze and set the Confidence Level to 95.00 percent. Check Chart Results, First Digit Test, Second Digit Test, and First 2 Digits Test, as shown in Figure 4. Click Finished, and ActiveData will complete and display the analysis on a new worksheet. The results of the First Digit Analysis are displayed in Figure 5. Note that “8” and “9” are significantly oversampled, as indicated by the magnitude of the Z Statistic. An Figure 3: Stratification results and chart in ActiveData
examination of the results of the First 2 Digits Test (not shown) indicates “83,” “88,” “95” and “97” are significantly oversampled. The auditor should concentrate
Performing a Benford’s Law Test with ActiveData
his examination on those transactions whose invoice amounts begin with the oversampled numbers.
Benford’s Law is a powerful tool in detecting fraud because it allows examiners to test numbers against recognized norms. In doing so, significant deviations from these expected values can be investigated to determine if there is evidence of fraud. Benford’s Law is especially useful at identifying bogus transactions and spotting transactions manipulated to avoid authorization and approval. For accountants and auditors faced with suspicion of bogus or illegal transactions, Benford’s Law provides an excellent means of highlighting transactions Figure 5: Results of first Digit Analysis performed in ActiveData
Summary Far from an exhaustive listing of all the ways you can use desktop technology to identify potential instances of fraud, the three examples presented above should be “eye-openers” with respect to how we can use technology to curtail fraud. Figure 4: Setting options for Benford’s analysis in ActiveData
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Thomas G. Stephens Jr., CPA, CITP is a shareholder in K2 Enterprises in Hammond, La. Contact him at tommy@k2e.com.
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The Magazine for Wisconsin CPAs A publication of the
Wisconsin Institute of Certified Public Accountants 235 N. Executive Drive Suite 200 Brookfield, WI 53005 www.wicpa.org
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