Have a Fallback Plan
Take a lesson from the Boy Scouts and “be prepared.”

Just published: My latest article in the Journal of Accounancy describes the practice continuation plan, its key elements, how it helps a sole practitioner and his or her dependents and clients, and how to take the first steps in implementing a plan.

New CPA Exam Gets Rolling

About 200 people will take the CPA exam electronically in a pilot set in New York City in November, and then be available to all candidates officially on April 5, 2004.

While the current exam is offered during two days in May and November, the electronic version will be available six days a week over a two-month period every quarter. The questions will be refreshed the third month of the quarter. Overall, the test is an hour and a half shorter than the 14-hour current version, because of the efficiencies of computerization. Candidates can take all portions of the exam at a couple of sittings or space them out over the course of 18 months.

More at... CPAs go high tech with new exam

From the Big 8 to the Last 88 . . . ?
CPA firms must register by next week with the PCAOB. As of Monday, only 88 firms had. "People just didn't want to risk their entire career for one bad audit," one managing partner, Lou Grassi in New York, tells the Washington Post.

Judge rules in CPAs’ favorIn the legal dispute that pitted two prominent local accountants against an Indianapolis city-county councilman, the accountants have prevailed.

Gallup Poll: Accounting's Image Recovers
Noting "a significant increase" over the last year in the positive image of most segments of American business and industry, Princeton, N.J.-based Gallup pollsters say the public's image rating of accounting has jumped 14 points compared to last August.

Overall, Gallup said, the computer industry continues to be the highest rated of any industry tested in Gallup's assessment of industry images, followed by the restaurant and grocery businesses. The three industries with the most negative images of those tested include the oil and gas industry, healthcare, and the legal field.

"The one industry whose image has improved the most compared to last year is accounting," Gallup said. Accounting rose from a net rating of 0 percent last year, when as many people gave it a negative rating as a positive one, to a positive 31 percent this year. "This obviously represents a significant improvement," Gallup said, noting, at the same time, that the industry has still not recovered to the positive 39 percent rating it received in 2001, in the pre-Enron era.

Other industry sectors whose positive images have risen significantly compared to last year include healthcare, the telephone industry, the legal field, pharmaceuticals, advertising and public relations, and the sports industry. (Many of these remain near the bottom of the image list, despite their relative gains.)

Only two sectors have slightly lower image ratings this year than they did last year: the retail industry, and farming and agriculture, both of which dropped by 3 points.

Perhaps more importantly, there are no industries rated this year whose images are nearly as negative as several measured in the 2001 survey. At that point, the oil and gas industry had a negative 30 percent rating, and the legal field and electric and gas utilities had negative 16 mpercent ratings.

Child Tax Credit Drives Traffic to IRS
Nielsen//NetRatings reports that traffic to the U.S. Department of Treasury jumped 77 percent during the week ending July 27. With the first set of refund checks mailed out on July 25, surfers from home logged on to check the status of their refunds. Traffic to the U.S. Department of Treasury jumped from 742,000 surfers during the week ending July 20, to more than 1.3 million unique visitors during the week ending July 27. More than 65 percent of the site’s audience visited the IRS Web page containing information about the Child Tax Credit Refund.

Oklahoma State Web Site Launches Online Services for Accountants
The Oklahoma Accountancy Board has launched an online service for accountants to apply for certification examinations and renew their professional licenses and permits. The new suite of services also allows the public to search for licensed accountants across the state. more at www.youroklahoma.com.


Despite One-Year Reprieve, Most Companies Hew to Sarbanes-Oxley Schedule
Most U.S. multinational companies are moving ahead with preparations for compliance with internal financial control provisions of the Sarbanes-Oxley Act of 2002, even though implementation of the provisions has been delayed by a year, according to PricwwaterhouseCoopers. And, more than a third are moving faster than required and are either planning or considering compliance for fiscal 2003, a year early, the firm says based on a survey. According to the survey, 60 percent of senior executives said their company plans to retain their original schedule for most Sarbanes-Oxley Section 404 preparation, despite the extension, while 37 percent said they would need more time. In addition, 76 percent are reporting that audit committees are expecting more extensive testing now.

SEC Answers Thorny Auditor Questions

The staff has issued an FAQ page, with questiions like these:
-- Can an accounting firm license or sell its proprietary income tax preparation software to an audit client?
-- Can the audit committee of the parent company function as the audit committee of the wholly-owned subsidiaries?
-- Would fees paid to the audit firm for operational audit services be included in "Audit-Related Fees"?
-- Are there circumstances where a tax or other specialty partner would be included within the definition of "audit partner"?
-- What are the rotation requirements for the "relationship" partner who is not the "lead" or "concurring" partner?

There are about 30 more at SEC Staff Responds to Frequently Asked Questions Regarding Auditor Independence; Press Release 2003-94

A Few Spineless Auditors Peril Whole Profession

Sir David Tweedie, the chairman of the London-based International Accounting Standards Board, is rarely at a loss for strong opinions or memorable ways of expressing them.

In his latest remarks, he says it's time for auditors to dig in their heels against smarmy clients.

"You need auditors who aren't invertebrates," Tweedie told an Australian newspaper. "They are going to have to have bags of backbone. If they can't now stand up to clients, the profession is finished. You could almost say: 'Why do you need an audit?' "

To be sure, Tweedie agrees that the profession is stiffening fast. And yet, some accounting firms could still meet the same fate as Arthur Andersen.

Meanwhile, under Tweedie the IASB is pushing for a global set of standards based not on thick rule books, but on a relatively compact set of principles -- a concept embraced by some at the U.S. Securities and Exchange Commission. The IASB's changes are set to start coming into effect in 2005. The main opposition appoears to be from France's President Jacques Chirac, who's worried about the effect on banks.

More at 'Spineless' Auditors, SEC Study on Principles-Based Accounting, and the IASB.


CPA Partnership Battle Turns from Nasty to Ridiculous
Partnership breakups are never pretty. But in Johnson County, Ind., two CPAs are charging in court that their former partner -- who happens to be a prominent elected official -- hired a stripper as a personal assistant and used the firm's computers to surf for porn.

In one corner is Curtis L. Coonrod, a CPA whose firm, CLC Services, performs accounting for municipal and county government boards throughout central Indiana. Coonrod also holds a seat on the Indianapolis City-County Council.

In the other corner are CPAs Eric Reedy and Jeffrey Peters, who left CLC last year to start their own firm.

It might have been a routine contract dispute, but Reedy and Peters are accusing Coonrod of hiring an exotic dancer as his personal assistant, and allowing her to use firm funds for, among other things, lipstick, perfume and oil changes. More at the Daily Journal.


And Speaking of Backbone...
Bending over backwards may be necessary in business, but it's bad for your health, according to a CPA-turned-yoga-guru, who has ideas on better ways to bend.

Bruce Van Horn, a CPA with a Big 4 pedigree, is a management consultant with a difference: He prescribes yoga.

"Business organizations, he says, "have failed to honor the individual as a complete being with unfortunate consequences. Emotions in the workplace such as grief, depression and anger are repressed until they explode, producing disastrous results."

His company offers yoga classes to corporations to help them develop a more effective motivational model. He is the CEO of Yoga for Business, Stress Consultant, author of "Yoga for Men" and the "Healthy Living Wellness Series." More at yogaforbusiness.com.

Who knows? Maybe it's good for auditors' backbones too.

Not Just Chicken Feed

The ignominius distinction of being the first company to be snagged under the Sarbanes-Oxley certification rules falls to Rica Foods Inc. The Miami company, which grows chickens in Costa Rico for McDonald's, Burger King, and KFC, had filed with the SEC saying Deloitte & Touche had signed off on the books. D&T hadn't. Needless to say, Rica has a new auditor. The SEC let off the CFO without a fine because, it said, she cooperated. But the chief exeutive paid a $25,000 fine. www.sec.gov.

Accounting's Image Recovers, according to New Gallup Poll

There has been a significant increase over the last year in the positive image of most segments of American business and industry -- particularly for accounting, whose positive rating has jumped 14 points compared to last August.

2 CPA mergers in Tennessee called part of national trend
EFS/Marlin & Edmondson P.C. of Nashville was acquired by Blankenship CPA Group PLLC and moved to Blankenship's Brentwood offices, effective June 1. And Indianapolis-based Crowe Chizek and Co. is buying Brentwood firm Kruse & Associates P.C. in a deal expected to close Sept. 1.

''It's an indication of consolidation in that industry that's going on all over the country really,'' said Troy Waugh, a consultant to the accounting profession. ''I'm seeing this in lot of cities out there.''

Attorneys, execs cringe at rule for whistle-blowing
Corporate lawyers and executives may be alarmed at new rules for lawyers to blow the whistle on corporate fraud. But post-Enron, their arguments were thin shrill.

"Lawyers should be held to the same standards of professional conduct as certified public accountants," says Carlos Heilemann, CPA and controller at Amerop Sugar in Miami. "Lawyers' main interest should be the preservation of the capital markets and investor interest."

The State Fiscal Crisis: What Can the States Do?

Maybe Warren Buffet, Arnold Schwarzenegger's celebrity financial advisor, had it right when he suggested Prop 13 stood in the way of needed tax increases in California.

A new study, unrelated to the California crisis, from the nonpartisan Urban Institute, suggests, government spending cuts do more damage to local economies and state budgets than tax hikes. "Indeed, from a short-term macroeconomic perspective, tax increases geared to high-income households are the least harmful option," says the report.

Tax Protester Faces Justice Dept.
LAS VEGAS — Can a man be held in contempt of court and jailed for selling copies of public records?

Irwin Schiff, the nation's best-known proponent of the idea that people are not required to pay income taxes, has put that provocative question to Lloyd D. George, a federal district judge who held a hearing here on Thursday on a Justice Department request that Mr. Schiff be put behind bars for civil contempt.

IRS Grants Tax Relief to Power Blackout Victims
WASHINGTON — The Internal Revenue Service announced tax relief for those hit by the power blackout in the Northeastern United States. The IRS will consider as timely any tax returns or payments due from today through next Friday, Aug. 22, if they are completed by Aug. 22, 2003. However, the law does not allow the agency to abate interest on any overdue taxes during this period. (IR-2003-100)

CPA Partnership Battle Turns from Nasty to Ridiculous
Two Johnson County, Ind., CPAs who are being sued by their former partner have countersued, claiming he hired a stripper as a personal assistant and used the firm’s computers to look at porn on the Web.

In one corner, according to the Daily Journal, is Curtis L. Coonrod, a CPA whose firm, CLC Services, performs accounting for municipal and county government boards throughout central Indiana. Coonrod also holds a seat on the Indianapolis City-County Council. He is a well-known figure in central Indiana government and political circles. A former Marion County auditor, he is on his second term on the city-county council and is running for re-election this fall.

In the other corner are CPAs Eric Reedy and Jeffrey Peters, former partners in Coonrod’s firm. They left CLC last year to start their own accounting firm, Reedy & Peters LLC.

The accountants said Coonrod hired a former exotic dancer as his personal assistant and escort. Coonrod allowed her to purchase lipstick, perfume and oil changes with CLC funds, they said. Moreover, those gifts and Coonrod’s car loan to the woman were not reported to the IRS as income for tax purposes, which violates tax laws, the men said.

Their counterclaim includes affidavits from two other former employees of CLC. The affidavits claim Coonrod billed clients for the hours of his personal assistant, even though the woman did little meaningful work.

One affidavit states the former stripper “would almost daily clip the split ends from her hair, one strand at a time, for hours at a time, while sitting at the reception desk at the front of the office.” The woman “would often sleep with her head down on the reception desk.”

Peters and Reedy go on to say that Coonrod used the firm’s computers to visit a Web site called www.jailbabes.com and contact female prisoners, visited another site called the Sugar Daddy chat room and openly displayed in the office his personal letters with incarcerated women.

Peters and Reedy resigned from CLC last fall because they felt Coonrod’s behavior put their CPA licenses and professional credibility in jeopardy, their counterclaim says.

“It’s personal conduct unless the individual conducting it allows it to permeate the workplace,” said Sandra Blevins, attorney for the two accountants.

“It’s not just the fact that Mr. Coonrod hired a stripper to come in as an assistant; Mr. Coonrod had this assistant review Mr. Reedy’s and Mr. Peters’ work for mathematical and grammatical changes. This person is not educated in the accounting field. Mr. Coonrod would bill this time to clients.

“That, and the fact that Mr. Coonrod allowed this individual to represent the firm in public, and in general created a very unprofessional atmosphere in the workplace, not only was in violation of their contract, but these actions had implications for tax purposes,” Blevins said.

“Anytime an accountant is in partnership with another individual, and that individual has improper conduct, it can have an effect on the other accountant,” she said. “As we learned from Arthur Andersen, it can have an effect on the entire group.”

Caught in the middle are seven taxpayer-supported government entities that are clients of Reedy & Peters. On May 19, Coonrod filed a lawsuit against Reedy and the Reedy & Peters firm. The suit claims Reedy violated a non-compete clause in his employment contract with CLC.

The contract said that if Reedy left CLC, he agreed not to compete against his former firm, solicit its clients or attempt to take away any of its business for two years after leaving. Reedy signed the contract in March 1999. He and a fellow CLC partner, Peters, resigned Oct. 31 to start their own firm. The lawsuit claims the two ex-partners lured government clients away from CLC to their new firm, depriving CLC of business.

Sir David Tweedie: 'Spineless' Auditors Could Kill Off the Profession

Sir David Tweedie, the London-based chairman of the International Accounting Standards Board, which sets the rules for the way companies prepare accounts, said it was time for auditors to dig in when clients put them under pressure to approve dodgy accounts, according to the Australian newspaper The Age.

If they didn't, he warned, the auditing profession faced extinction.

"You need auditors who aren't invertebrates," Sir David said. "They are going to have to have bags of backbone.

"If they can't now stand up to clients, the profession is finished. You could almost say: 'Why do you need an audit?' "

He said some accounting firms could still meet the same fate as Andersen, which imploded following a parade of accounting scandals led by clients including Enron, WorldCom, Waste Management and, in Australia, HIH.

"It was the market that killed Andersen. People just pulled away from it and it couldn't defend itself and the parts of Andersen that weren't affected just dived for cover with somebody else," he said.

"That's going to happen to any other firm, and one of the big dangers is that there are only four of them left. There must be a risk that some time in the future, one of them collects two or three of them (scandals) on the trot and away it goes. It's in their interest to be tough."

He said, however, that the big firms now seemed to realize that the profession was at the crossroads and that it was in their interests to be more rigorous in enforcing the accounting rules.

Sir David's board is now forcing companies and auditors around the world to embrace radical changes that aim to make financial accounts more transparent to investors.

Instead of relying on thick rule books that have allowed companies to seek out accounting loopholes, accountants and companies will have to get used to thinner documents that focus on generic principles. The aim is to keep loopholes to a minimum.

He conceded that the changes when they came into force in 2005 would show that some of the world's biggest companies, including some Australian corporates, are less healthy than previously thought. But despite pressure from business leaders and politicians - including France's President Jacques Chirac - he said the board would not water down its reform agenda.

The future, however, lay in the hands of the Big Four, he said. "This is where professional ethics and professionalism come in. Now can you (accountants) deliver?"

This story was found at TheAge.com.au.

And Now for Something Completely Different...
Bending over backwards may be necessary in business, but it's bad for you, according to a CPA-turned-yoga-guru, who has ideas on better ways to bend.

Bruce Van Horn, a CPA with a Big 4 pedigree, is a management consultant with a difference: He prescribes yoga.

"Business organizations, he says, "have failed to honor the individual as a complete being with unfortunate consequences. Emotions in the workplace such as grief, depression and anger are repressed until they explode, producing disastrous results."

His company offers yoga classes to corporations to help them develop a more effective motivational model. He is the CEO of Yoga for Business, Stress Consultant, author of "Yoga for Men" and the "Healthy Living Wellness Series, at his website www.yogaforbusiness.com.

"Many healthcare problems are caused or triggered by workplace issues, especially in the context of fear-based motivational systems. Stress triggers the fight/flight hormonal response which has been linked to short and long term increases in illness," says Van Horn. "Our entire industrial complex is at risk for massive litigation as workplace stress now costs our society $400 billion annually."

Van Horn believes that excess quantities of the hormones adrenaline and cortisol are rampant in our business organizations, and are literally killing us. "Men are especially vulnerable in the workplace because they view their jobs as their life," he says. "Mankind's first organizations as human beings some 6 million years ago were based on fear and the need to form groups for survival. Our stress response, which was the key to our early survival, has now become our greatest health threat and the single most important limiting factor in our longevity."

He says he has a cadre well-known names behind him, including Patch Adams, M.D., played by Robin Williams in the movie. "I am fascinated by your work," Dr. Adams is quoted as saying. "Our society surely needs it." Other luminaries: Dr. Bernie Siegel, Dr. Andrew Weil, and Dr. Deepak Chopra.

IFAC Calls For Audit Firms Worldwide to Open Books, Shut Down Conflicts
The report, titled Rebuilding Public Confidence In Financial Reporting, was compiled by a taskforce chaired by John Crow, a former governor of Canada's central bank, and commissioned by the International Federation of Accountants.

It proposes:
-- Accounting firms must dump more high-risk clients.
-- Audit partners should not be rewarded for selling non-audit services.
-- Firms should disclose their finances, including how much they depend on particular clients.
-- A tougher "tone at the top" at accounting firms.

More at IFAC.

PCAOB Starts Sending Out Bills

The Public Company Accounting Oversight Board is notifying publicly traded companies, investment companies and other equity issuers of the accounting support fees that they will pay to fund the operations of the PCAOB. The PCAOB will also be collecting fees for the first time for the FASB.

The largest 1,000 companies will be paying 87 percent of the board's $68-million annual budget. The biggest, thought to be GE, may get a $1.3 million bill for the PCAOB and another one for $500,000 for FASB.

They say good accounting doesn't come cheap. But this seems worth the money.

Dixon Odom Loses Forensics Unit
Blame Sarbanes-Oxley, says Ralph Summerford, head of the group that has broken away from Dixon Odom PLLC, a 16-office firm based in High Point, N.C.

"Anytime you have a large organization, there is the potential for conflicts of interest," Summerford tells the Birmingham, Ala., local business weekly. "Some of the cases we would normally work on we couldn't. We were starting to have problems accepting clients because of their relationship with Dixon Odom."

Summerford was blocked from working in the Enron bankruptcy because the law firm had once been involved in a malpractice case against Dixon Odom.

Both sides say the split was amicable.

More

Nearly 20% in US Laid Off in Past Three Years
Is there any wonder about why people are worried? Workers in the Services industry have been the hardest hit, with 15% of laid off workers saying they worked in Services. Another 14% say they worked in the Technical arena before being laid off, while 13% were Clerical/Sales workers. On the other hand, only 3% of workers who have been laid off worked in the Healthcare industry. More (pdf)