New Ethics Rules Mean Some CEOs Will Be Hunting for a New CPA
Alan L. Olsen, CPA, MBA (tax)
Greenstein, Rogoff, Olsen & Co.
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The relationship between a chief executive and his accountant is an extremely important
one. An outside accountant can be one of your most trusted business advisors and
a key to your success. That’s one of the reasons why a new initiative by the Public
Company Accounting Oversight Board (PCAOB) is creating a stir in the offices of
CEOs across the land.
Established by the Sarbanes-Oxley Act, the PCAOB is charged with establishing rules
for—among other things—auditing, quality control, ethics, and independence. In April
of this year the PCAOB issued a set of seven rules for auditors of public companies.
Though focused primarily on tax services, these rules also address ethics and independence.
The Rule in Question
Rule 3523 is entitled “Tax Services for Persons in a Financial Reporting Oversight
Role.” In a nutshell, this rule states that an audit firm must maintain its independence
by not providing tax services to any person in an audit client firm who fills a
“Financial Reporting Oversight Role” (FROR). In layman’s terms, this means that
CEO’s, CFOs, controllers, and others cannot have the company’s CPA firm do his or
her personal taxes, or those of his spouse or dependents. Using the same firm to
perform both services would create at minimum the appearance of a conflict of interest.
So Now What Do I Do?
There is a daunting array of accountants and firms to choose from—from sole practitioners
to huge national firms, from generalists to highly specialized CPAs. However, there
are few basic guidelines you can follow in order to make the process of choosing
the right accountant a little easier:
- What’s the Big Picture? Take the time to step back and look at your needs
from a 30,000 foot perspective. Your new accountant should be able to deal with
not only your present need, but with the unforeseen circumstances of the future.
A good financial partner will not only manage the individual pieces of your financial
picture, but also won’t miss the forest for the trees.
- Specialist or Generalist? If your financial needs require a specialist, look
for someone who has experience in your area. Do you simply need someone to prepare
your taxes? Then perhaps a general purpose firm will do. But as in most industries
today, specialization has worked its way into all areas of society and accounting
firms are no different.
- Large or Small? Will you feel more comfortable with a large name-brand firm,
or do you want the personal attention a smaller organization can give you? Larger
firms may farm out pieces of your work to junior staff or even outside contractors.
You may not be getting what (and who) you think you are paying for. And on the other
hand, the smaller firm may not have the breadth of resources you really need.
- Check the Qualifications. It’s easy to find out if the firm you are investigating
is properly licensed or has any pending disciplinary actions. Make sure the people
you partner with have the education, licenses and certifications you need. Accountants
who have the certified public accountant (CPA) designation must adhere to certain
rigorous accounting standards. It's uncommon, but some who offer accounting services
may be unqualified and may not carry liability insurance. Nor would there be any
supervisory body you could go to if things go wrong. The apparent savings in fees,
if any, could prove costly in the long run.
- Reputation is Key. Ask around and find out what kind of reputation the prospective
accountant (or firm) has. Talk to your friends and business associates. If your
friends and business associates had to choose another accountant, whom would they
choose? A firm's reputation among non-clients is almost as important as its track
record with existing clients. Finally, consider the “relationship fit.” In other
words, do you get along with the individual? Do you share a similar outlook and
philosophy? Does he or she show a real interest in your business?
Don’t forget that your primary factor in choosing an accountant should be the value
he or she brings to the relationship. And always remember that real value from an
accounting firm comes from several key factors:
- Superior professional service
- A forward-thinking attitude with your needs at heart
- A relationship of trust
Evaluating such elements as a proactive approach to your total financial picture,
the ability to bring specialized expertise to your situation, and superior professional
credentials will help you make an informed decision on the CPA's skills and ability
to address your unique needs.
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About the Author
Alan L. Olsen, CPA, MBA (tax), is the Managing Partner at Greenstein, Rogoff, Olsen
& Co., a Bay Area CPA firm that focuses on serving Silicon Valley’s high end
clients. A specialist in income tax planning, Alan frequently lectures and writes
articles on tax issues for professional organizations and community groups. Alan
has over 21 years experience in advanced tax planning including international tax,
company reorganizations, multi-state taxation, financial statement preparation,
stock options, estates and trusts, and representation before tax authorities.