Posted: November 19, 2018 Filed under: Guest Blogger
When I got the chance to enter the internal auditing world with our local university (my alma mater) and colleges, I jumped on it. In my mind, I remember thinking it would be just like external auditing, but with less hours and a more family friendly schedule. As a working mom, having good work-life balance is crucial. I wouldn’t say any day since I started internal auditing is a typical day. Every day is different. To be successful in this profession, you must be comfortable with priorities constantly changing.
In our office, we have a team of five internal and IT auditors who are responsible for four campuses. We perform legislatively required audits, risk-based audits (both financial and compliance), investigations, ongoing risk assessments, special projects for management and we assist external auditors coming in. Below is an example of what one of my days may look like, but remember every day is different.
I just arrived at work and breathe a sigh of relief as I’ve successfully gotten my two young sons off to two different schools and made it to the office on time. Most people would put on the coffee to brew, but I’m not a coffee drinker. I say good morning to my coworkers, sit down at my computer, and start going through any emails and voicemails I’ve received.
I’m done responding to emails and voicemails and start on an audit. The work for this audit could include any number of things, including completing or reviewing workpapers, reading laws, policies and/or procedures, writing or reviewing audit reports, completing fieldwork, doing data analytics, making phone calls, sending emails requesting documentation, etc.
I receive a call from management indicating a concern that fraud may be occurring in a certain area. After obtaining the relevant details, I put my audit work to the side and lock it up, then head out to campus to meet with the person voicing the concern. If needed, I schedule additional interviews with any relevant party who has information on the concern. Our team then launches an investigation if we determine there is a need. These investigations are highly confidential and on a need-to-know basis. Investigations move very quickly at first, but then slow down as we get into the detail. Typically, when we have an investigation, depending on the nature of it, we will notify the president of the university or college, as well as the campus police chief. If we need to get data from an employee’s computer or email account, we get authority from the ISO to do so.
Our team has gotten approval to take images of an employee’s laptop. We head over to their office (while they are away at lunch) and use our tools to take an image of it. We head back to the office and use our forensic tool to target specific codewords or topics to help search through all of the files and/or emails on their computer. The forensic tool is time consuming, so once we start that running, we head back to our office to prepare workpapers of the interview that has taken place. Our IT auditors now create a new project file on our server and I set up the project in our audit workpaper system.
I head to lunch. Yes, I’m back to getting an entire hour lunch (most days) and it is amazing!
I’m back in my office. I’ve done all I can do on the investigation. The forensic tool is still working, so now I’m back to the audit I was working on this morning.
I get a phone call from management asking me to sit in on a last-minute meeting with an external auditor. I head to campus for the meeting.
I’m back at my office and my boss calls the team together for a team meeting. We go over all our projects that we are currently working on and then brainstorm on the new investigation and what we think our approach will be, as well as begin to assess the risks the university or college is facing.
I’m done for the day. I head out to pick my boys up from school and move on to my favorite activity – 1st grade homework! I’m completely exaggerating on my excitement level.
Every day is different and can be more or less eventful than the day described above, especially during risk assessment time in the summer when we are working on our audit plan for the next year. During that time, we have three or four meetings per day across the campuses and I’m still working on my other audits and projects.
Key Takeaways from My Time as an Internal Auditor
- Internal auditors need good people and communication skills. You will be working with individuals who serve in different departments and come from various backgrounds. You are in and out of meetings, on phone calls, sending emails, and constantly interacting with a wide variety of individuals.
- Internal auditors must always be ready to ask questions and more questions and more questions. You also have to anticipate what your Board (or whoever you report to) is going to ask you.
- Internal auditors must be knowledgeable of every aspect of an organization, not just the financial or compliance side.
- Some people still tend to view us as the enemy or the “gotcha police” even though we are internal. It’s the stigma that comes with the auditor title. Once employees realize the value of your department, you become a trusted advisor and resource.
- In my case, internal auditing has allowed me to continue doing what I love (auditing of any sort) without working tons of extra hours. It’s a great choice for your career and your work-life balance.
Marylyn Byrd, CPA, is an internal auditor with the Texas State University System responsible for the four Lamar components – Lamar University, Lamar Institute of Technology, Lamar State College – Port Arthur and Lamar State College – Orange. Byrd is a member of TSCPA’s Board of Directors and former president of the Southeast Texas Chapter.
Posted: September 17, 2018 Filed under: Guest Blogger
Public speaking: a phrase that strikes fear in the hearts of otherwise confident people is something that seems natural for some, and feels like punishment for others. Still, public speaking is something that we all need to get comfortable with in our profession of choice.
More and more, accountants are serving in an advisory role for companies, and that job responsibility is not likely going away any time soon. As a student who myself wondered when public speaking would ever become comfortable, I thought I would share some of the reframing tools I have used to help me survive (and maybe even enjoy) presentations.
The audience wants you to succeed
From my experience, people have interesting things to say; you just have to listen! For the audience, this is a chance to gain a new perspective on a topic they might not know much about. Since you are the presenter, you have put the time and effort in to become well-informed on the topic you are covering. As the subject-matter expert, the audience is not actively looking to point out your faults as much as they are seeking to understand where you are coming from as the presenter.
Use that idea to your advantage in developing your presentation and see if that makes the preparation process more enjoyable for you. Positive thinking allows you to claim the power to decide how you will approach the situation and shows that you are willing to make the best of the uncomfortable circumstances.
You can turn your anxiety into excitement
Nervousness is a natural physiological response to standing in front of a crowd. We are human after all! How anxiety affects you is entirely up to you, though! Feeling nervous typically makes people more alert and aware of their surroundings. This is something that can be used to your advantage when delivering a message to an audience.
Try asking yourself: “Why am I nervous?” Oftentimes, the reasons we feel nervous are fleeting and will not be relevant in the long-term. If you think about the bigger picture of your purpose in delivering your presentation, you can form an idea of why your message matters to you. Ultimately, uncovering your motivations behind public speaking allows you to take a step back and realize that your presentation is tied to meaningful goals that you set for a reason, and that can propel you to envision a positive outcome.
Think of the value you are adding
Rather than wishing your presentation to be over, consider why you have been asked to speak in front of an audience in the first place. Chances are, you have completed the time-consuming part of doing your research to prepare for a speech. You want your preparation and knowledge to shine. The best way to do that is to forget about how many people you are speaking to and to think about what are the main desired takeaways for them.
If you take your research further and consider who your audience is, you can gauge what their objectives are from sitting in on your presentation and cater the message to them. When you do this, you are ensuring that they feel they have gained something from the experience and you are adding value in the process.
This is a learning opportunity
Just as the audience wants to learn from you, you should keep an open mind about learning from the audience, too! Think about it – which classes have been the most enjoyable for you? Chances are, the most memorable classes are those that you actively participated in.
Whether your reason for participating in class discussions was to pass the time or because you were genuinely interested in the topics mentioned, this is the type of environment an effective presentation inspires. As a speaker, you should leave the door open for audience interaction and signal to them that you care and want to learn from them as much as they can learn from you.
Are you uncomfortable? That is great—that is a sign that you are growing as an individual and stretching your limits in a positive way! By reframing your thoughts and giving them a positive spin, you will be well on your way to becoming a more effective and confident public speaker. Like with anything else, believe that you can and you’re halfway there!
Student Blogger: Rachel McKenna
TXCPA2B is a blog written by Texas students in pursuit of the CPA certificate. The views expressed here are those of the authors and not necessarily held by TSCPA or our members.
Posted: August 20, 2018 Filed under: Guest Blogger
For years, best practices have recommended long-term planning for organizational operations, upkeep of major assets and healthy continuity of business operations. A common caveat to long-term planning warns that forecasts exceeding 10 years may yield incorrect results. Hence, it is better to calculate forecasts for a 5 to 10 year period.
The market offers many tools for developing and maintaining a solid model to help with long-term planning. The tool one uses is not as important as the ability to insert all the crucial data needed to properly plan for the future. Most models consist of an Excel workbook with linked sheets and assumptions used in the calculation of future activities. An important task to remember is the gathering of all the available data that needs to be considered as one plans for future revenues and related costs.
The initial step needs to include a complete list of revenues generated by the organization. All revenues commonly generated by operational activities should be considered in the long-term plan model. In calculating the 5 to 10 year revenue projections, gathering 3 to 5 years of actual results and calculating an average amount per year is a good start.
Once all demographic and economic impacts have been determined, assumption ratios can be calculated. These assumption ratios will be helpful in growing revenue and costs amounts from year to year for up to 10 years.
Next step, information of all operational expenses needs to be gathered. Actual operational expenses for a 3 to 5 year period will help with the preparation of the long-term plan related to operational costs. As stated above, a yearly average for each type of expense should be calculated for the base year and the assumption ratios will similarly be applied to the base expense year to calculate expenses for the 5 to 10 years projections.
Final step, major improvements and replacements need to be considered for the same period of time that operational expenses are projected. It is highly recommended that an organization spread the cost of replacements over a period of time. Annual amounts should be calculated and a reserve should be funded annually to accumulate the amounts needed for these major purchases.
Once all the above information has been gathered, it’s time to create the plan. Start with a description of all revenues and costs to be forecasted. Separate operating costs from capital replacements and improvements so that operating net revenue can be displayed separately from reserve balances. Columns need to include actual results of activities for comparison with the forecasted amount.
Finally, your plan is created so the fun begins to see how actual results match up to your forecasts. GOOD LUCK!
Olivia Riley, CPA is CFO of the Town of Addison. Before joining the Town of Addison, Riley worked for the City of Cedar Park and spent 20 years in public accounting where she worked as an auditor for counties, school districts and cities. Riley is a member of TSCPA’s Board of Directors and former president of the Austin Chapter.
Posted: July 16, 2018 Filed under: Guest Blogger
While some Baby Boomers are starting to retire, there are many that are still filling upper management positions. As more and more Millennials graduate and settle into their careers, they are bringing different outlooks on life to the workforce. These two generations working together highlight the differences between Baby Boomer bosses and Millennial employees that can stir up conflict.
Baby Boomers have a distinct mentality about work and their positions within their organizations. Many Baby Boomers have an ambitious work ethic that can appear to a Millennial to be a workaholic attitude or a “live to work” attitude. Baby Boomers are also very loyal to the organizations that they work in, more so than their subsequent generations. This loyalty is beneficial because organizations require Baby Boomers to provide their vast array of experience, knowledge, and ethical leadership. However, with their work ethic and experience, Baby Boomers can get critical of, or frustrated with, those who do not share their same attitudes and qualities regarding work.
The fact of the matter is that Millennials have a different attitude surrounding work and how it fits into the grand scheme of life. First off, Millennials prefer to have a work-life balance that accommodates their pursuits of personal hobbies or interests. This attitude of “working to live” can come across as lazy to their bosses. Second, Millennials tend to want more frequent, open communication and feedback from their supervisors than preceding generations have. Supervisors may see this desire for more positive support as burdensome. Also, the Millennials’ inclination to want to talk about everything, even information that is more sensitive or reserved for senior management can be taken as a sign of disrespect. Third, unlike the Baby Boomers who are loyal to the company, Millennials are usually more loyal to an individual or supervisor that they admire. This creates a willingness to leave if the supervisor moves on or no longer works with them on a frequent basis.
Although all of the above Millennial traits can strain relationships with Baby Boomer bosses, Millennials bring some great qualities to an organization. First, Millennials are more accepting of diversity which leads to better communication and the ability to work in groups. Second, they have unique perspectives and can be a great asset when trying to solve problems. Lastly, they have grown up surrounded by technology. Millennials are great at mastering new technologies as they emerge. Organizations can use the unique attributes of both the Baby Boomers and Millennials to minimize the risk of clashing viewpoints.
There are three great ways a company or an organization can satisfy the new attitudes of Millennials while preserving the great qualities of Baby Boomers. First, organizations can encourage communication and problem solving by creating a more open work environment. This can be done through on-boarding processes with new hires to help assimilate them into an organization’s culture. Also, continued socialization after the on-boarding process fulfills the communication desire of Millennials while decreasing the differences that Baby Boomers’ perceive (Anderson, Baur, Griffith & Buckley, 2017). Second, when organizations are willing to add some flexibility into their structure they are likely to see many advantages in relation to their employees such as lower turnover, higher job satisfaction, and greater synergy with Millennials (Myers & Sadaghiani, 2010). Lastly, organizations can build on the technological savvy of Millennials by using the idea of reverse mentoring. Reverse mentoring is the idea of pairing a Millennial with a Baby Boomer to help the Baby Boomer learn how to more efficiently use the technology within the organization. This creates a sense of importance and positive interaction for the Millennial while at the same time allowing the Baby Boomer to teach the Millennial more about how the organization works and what is expected.
At the end of the day, whether you are a Baby Boomer or a Millennial, we should all be thankful because we help define each other, build off of each other’s strengths, and fill in each other’s areas of weakness to create well-rounded organizations and communities. We need to learn how to interact with the purpose of understanding our differences instead of criticizing them.
Anderson, H. J., Baur, J. E., Griffith, J. A., & Buckley, M. R. (2017). What works for you may not work for (Gen)Me: Limitations of present leadership theories for the new generation. The Leadership Quarterly,28(1), 245-260. Retrieved from https://doi.org/10.1016/j.leaqua.2016.08.001.
Myers, K. K., & Sadaghiani, K. (2010). Millennials in the Workplace: A Communication Perspective on Millennials’ Organizational Relationships and Performance. Journal of Business and Psychology,25, 225-238. doi:10.1007/s10869-010-9172-7
Staci White, CPA, is an accountant for Howard, Cunningham, Houchin, & Turner, LLP in Lubbock, Texas. She is a member of the South Plains Chapter and currently serves on the TSCPA Board of Directors.
Posted: June 18, 2018 Filed under: Guest Blogger
Selling a company is three parts art, seven parts science with a little sprinkle of luck, but it is 100 percent process oriented. It is critical to begin with strategic planning to posture the company in its best operational and financial light. Sellers commonly fail to consider exit strategies when things are going well for their company, and tend not to focus on an exit strategy or transfer process until an unforeseen external event triggers an awakening or they decide to retire or reach burn-out. Knowledgeable sellers understand that to exert control over internal forces (employees, accounting and operational processes) and external forces (economic turbulence, industry downturn, changing competition, illness, etc.) they must clearly examine all aspects of their business, define their personal goals and objectives, and begin exit preparation yesterday. A transaction has three characters; a seller, a buyer and a financing source. Sellers should take a critical look at their company from the prospective buyer’s or lender’s viewpoint. If sellers manage their company with an “End in Mind” decision-making outlook, then they will always be in a continuous process of preparing their company for sale.
Seller’s Goals and Objectives
How do sellers begin to define their goals and objectives? Sellers must delineate specific objectives for financial goals (liquidity, sale price, taxation/estate planning) and non-financial goals (succession, legacy and reputation, employee, stakeholder concerns and other special interests). Decision-making questions include: To whom do I want to sell/transfer the business (family, financial investors or competitors)? How long, post-closing, do I want to be involved? Do I want to accept some upside/risk? Are there employees or others whom I want to protect/reward? What is my after-sale tax position? What are my financial alternatives post closings?
Assemble and Communicate with Trusted Advisor Professionals
Sellers should not try planning their exit strategy alone. Running a company is a full-time job. Sellers shouldn’t take their eye of the ball. Sellers should assemble their advisory team early in the exit-strategy planning process and clearly communicate their exit goals and objectives. Sellers must listen to their advisors’ advice, understand their options and implement the agreed upon suggestions. Advisors who must be in position early in the planning process include: certified public accountant, transactional attorney, financial advisor, merger and acquisition advisor.
Market Value and Transaction Structuring Alternatives
A prerequisite of a comprehensive exit plan is to understand the current market value range of the company. A comparison of market value to the seller’s financial objectives will indicate if the right time to exit is now. If market value is too low a seller needs to contemplate how they will increase their company’s value. Deal structuring, tax structuring and financial engineering can significantly impact the seller’s transactional proceeds. Sellers that understand the implications of transaction structuring alternatives will be prepared when they elect to take their company to market.
Influence Value — Develop Credible Financial and Operational Projections
“Buyers analyze the past but buy the future”. A persuasive growth strategy is a key element of exit planning. In a sale, to maximize the transactional value of a company, sellers must provide potential buyers with a compelling story of future growth opportunities and profitability. Sellers should develop a credible set of detailed financial projections and key operational drivers for the next three to five years which will, in part, define the buyer’s perception of the company’s future and management’s ability to deliver.
A Company’s Financial Profile Via a Buyer’s/Lender’s Perspective
Owners should let their CPA perform the heavy lifting but having a thorough personal knowledge of the company’s financial performance is sage advice when preparing to sell your company. Buyers will want a transparent understanding of the target company’s historical performance. It is best to have three years of audited financial statements plus interim year-to-date financials. Very clean, compiled/reviewed statements with their accompanying tax returns will suffice in some cases. The validation of the “the numbers” via audited financials will engender confidence with the buyer. Accurate historical financial information will allow the buyer to focus on the future with a better understanding of the risks and rewards associated with their potential acquisition. Sellers and their CPAs should focus on:
- Evaluating the company’s current corporate structure.
- Eliminating personal expenses and over generous benefits to friends and family.
- Cleaning up the balance sheet by:
- Selling excess or non-producing assets;
- Recognizing all on and off-balance sheet liabilities such as customer prepayments, work in process billings, warranty obligations etc. openly; and
- Taking any necessary “write downs” for uncollectable accounts receivable (A/R) or unusable inventory.
- Eliminating any unrelated “side” activities intermixed with the company.
- Maintaining an accurate inventory and current inventory value.
- Understanding the company’s key performance indicators and how they compare in the industry.
- Improving the quality of earnings.
A Company’s Operational Profile Via a Buyer’s/Lender’s Perspective
Buyers will spotlight the key operational drivers of the target company. A seller should review and be prepared to give accurate details regarding the prior, current and future status of the:
- Size of the Company
- Location of the Company
- History of the Company
- Management of the Company
- Employee Resources
- Barriers to Entry
- Manufacturing Processes
- Market Share
- Client Base
- Business Growth
- Pricing Policy
- Inventory Levels
Owners who have prepared their exit strategy will begin the marketing of their company in a position of strength. Clear goals and objectives will place the seller in the optimal position to negotiate favorable price and terms, or, if necessary, to walk away.
Janae Chamblee, CPA, BCB, CBI, is a Director of the TSCPA and the Dallas CPA Society. As the owner of First Business Resources, Inc.*, a merger and acquisition services company, Janae has twenty years of experience in providing hands-on guidance to her clients in helping them buy or sell their company.
*This firm is not a CPA firm.
Posted: April 16, 2018 Filed under: Guest Blogger
I still have family friends ask me about my career path with a response similar to this: “Accounting, huh? That seems…interesting.” It is hard for people to try and act excited about my college path, especially when they still think of my generation as the technological savvy, entrepreneurial, adventurous type. However, I think a lot of individuals confuse Millennials with Generation Z; furthermore, there are actually a lot of Gen Z’ers that are interested in fields like accounting. Here is a list of reasons why I, as a fellow Gen Z’er, chose accounting:
“Accountants are boring.” Some of my friends continue to joke with me about this idea, but I laugh it off! I think a lot of non-accounting majors do not understand the vast routes you can take. For instance, by the time I graduate, I will have engaged in three internships—all of them will be based on accounting but are completely different at the same time. My first internship was in corporate accounting for a private company in an office-like environment. My second internship will be in internal audit with a lead producing company. I will be able to visit multiple facilities in France, California and New York and assist with conducting audits. Finally, my third internship will be in external audit with a Big Four firm. This will allow me to engage with different clients and review their financial records and documents.
And it doesn’t just end there. There are SO many other different pathways to take in an accounting career, and each one will help you develop a new skill set. Accounting is great for the indecisive but also for those who want to work the same job until retirement.
Stability and Growth
I am personally not a huge risk-taker. In fact, I have already started a Roth IRA to save up for my retirement because I like having a cushion to fall back on. With an accounting career (especially public accounting) I can feel safe knowing that I probably won’t be laid off any time soon. Also, a public accounting career provides almost guaranteed promotions after a certain timeframe. “Hmm, I wonder if I will ever get promoted to senior associate?” is not a question new auditors typically have to worry about. It certainly takes a heavy weight off my shoulders!
Accounting is not Always Forever
But what if you end up hating accounting? This is a question I receive a LOT, and here’s my take on it:
As I mentioned earlier, there are different routes to take, so I could always try a different accounting sector. Even then, if I still did not enjoy my career, I am not forced to stay in accounting just because that is what my degree is in. I know many individuals who have switched from accounting to marketing or human resources and are currently executives at a company. Accounting provides such a strong foundation that is integral in all parts of a business and can allow you to branch out to new departments. That’s why I personally think accounting is a strong degree to pick for undecisive business majors.
I’ll be honest, accounting is typically not the first major that comes to a student’s mind in terms of studies (it may be a last choice for some, in fact). However, the benefits, learning experience and ability to grow, and even travel, are just a few of the factors that attract Generation Z’ers to this field. I think accounting is a hidden gem that not many young students think about, so I consider myself lucky to have discovered it so early!
Blogger: Liz Wood
TXCPA2B is a blog written by Texas students in pursuit of the CPA certificate. The views expressed here are those of the authors and not necessarily held by TSCPA or our members.
Posted: March 26, 2018 Filed under: Guest Blogger
The Tax Cuts and Jobs Act of 2017 lowered the corporate income tax rate to a flat 21 percent and provided a one-time deemed repatriation tax on controlled foreign corporations’ current earnings and prior untaxed earnings back to 1986. The repatriation rate is 15.5 percent on liquid assets and 8 percent on illiquid assets instead of the prior 35 percent rate. Many large corporations are reporting radical changes to their bottom line from adjustments to their deferred tax assets and liabilities.
It is difficult to estimate the book income effect of the repatriation tax because we do not know how management may have initially accounted the deferred tax, with many companies assuming that earnings would be perpetually reinvested overseas and not booking deferred tax liabilities. Also, there is uncertainty as to when repatriation will be recognized with the new tax law allowing the tax to be paid over up to eight years. Some companies will pick up the tax expense immediately, with Apple announcing that it will pay $38 billion to repatriate its foreign earnings of $252.3 billion that have not been previously taxed in the U.S. It is estimated that more than $2.6 trillion in corporate profits are sitting in foreign bank accounts.
For tax rate changes, recent reports in the press show major companies taking hits: Amgen, $6-6.5 billion; Bank of America, $3 billion; and Credit Suisse, $2.32 billion. Fannie Mae and Freddie Mac had net operating losses from the financial meltdown and will have to adjust the value of their deferred assets downward by a combined total of $10-$20 billion. However, about two-thirds of the companies in the Dow Jones Industrial Average will have a boost in income as a result of reducing deferred tax liabilities. These include Verizon, $18.4 billion; Exxon, $12 billion; Pfizer, $17.5 billion; and Apple, $11 billion.
These valuation changes flow through the income statement, but most savvy analysts view this as not important and a distraction from real operating results. On the first page of his annual letter to shareholders, Warren Buffet commented on the $24 billion increase in Berkshire Hathaway income from adjusting its deferred taxes, saying that it distracted from operating results and, “For analytical purposes, Berkshire’s ‘bottom-line’ will be useless.”
Smaller corporations have less dramatic dollar amounts, but they still must make required valuation adjustments to their deferred taxes and be prepared to explain unexpected results to owners and lenders.
Accounting for taxes is a generally shared responsibility for financial accounting and tax experts, but often they each look at the other as having the primary responsibility. Financial accountants sometimes see tax accounting as tax, and tax experts see tax accounting as having FINs (financial interpretations). The important thing is for everyone to know what is required at this point. Accounting Standards Codification (ASC) 740, Income Taxes, requires adjustments to the beginning of the year balance of a valuation allowance if there is a change in circumstances that causes a change in management’s judgment about the realizability of the recognized deferred tax assets. A valuation allowance is required if it is more likely than not that some or all of the deferred tax asset will not be realized in the future. ASC 740 also requires analysis and disclosure of changes to deferred tax assets, which will help in seeing how corporations are managing their deferred tax assets and liabilities.
William R. Stromsem, JD, CPA, is a technical writer for TSCPA’s Federal Tax Policy Committee and an assistant professor at George Washington University School of Business.