May 2011


I think the number of accounting credentials available today is getting out of hand. Don’t get me wrong. I am a big advocate of education. I even started an online education company. So, I get that credentials are important. They show that we have the proper education and training to do the job.

But, sometimes the number of initials trailing after a name looks a little over the top to me. And I don’t know that the lay person (aka potential client) really has a clue what all these initials really mean.

These are the credentials I see regularly, in no particular order:

• CPA (Certified Public Accountant)
• EA (Enrolled Agent)
• CMA (Certified Management Accountant)
• CFP (Certified Financial Planner)
• CIA (Certified Internal Auditor)
• Cr.FA (Certified Forensic Accountant)
• ABA (Accredited Business Accountant/Advisor)
• ATP (Accredited Tax Preparer)
• ARA (Accredited Retirement Advisor)
• ATA (Accredited Tax Advisor)
• CITP (Certified Information Technology Professional)
• CFA (Chartered Financial Analyst)
• CVA (Certified Valuation Analyst)
• ABV (Accredited in Business Valuation)
• ASA (Accredited Senior Appraiser)
• CFF (Certified in Financial Forensics)
• CPIM (Certified in Production Inventory Management)
• CFE (Certified Fraud Examiner)

And coming soon, all paid tax return preparers will be required to pass a competency test, take continuing education, and obtain a number. Will they put PTIN after their names?

Seriously, how many credentials do we need?

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I know that continuing professional education for accountants is a mandated thing and that sometimes it’s only about the all mighty CPE credit. But that does not take away from the potential value of the education itself. Please–continuing education isn’t just about putting in the time! Even in non-regulated professions, outside training is considered essential to stay up to date with the latest trends and best practices in your field.

Are you staying up to date? Are you getting all the value you should from your training?

How do I do that, you ask? Well, it’s been proven that learning is not a passive endeavor. Adults learn best when they actively “participate” in their learning. You must take some responsibility in your own learning process.

I know that most program descriptions list “no advance preparation required,” but training can be such a significant investment of your time and money, it makes sense that you do whatever it takes to maximize the return on your investment.

Here are 5 ways to maximize the value you get from your training:

1. Before your training program, spend a little time preparing. Think about why you chose this particular program. How does the topic apply to your job? What would you like to get out of the training? Just one essential tidbit can be worth the cost of the program.

2. If possible take a look at the handouts ahead of time. Look for content areas that interest you. Jot down some questions you might want to ask the instructor.

3. During the program, turn off your distracting beeps and bells: cell phone, email notifications, etc. Focus on the presentation. Take notes!

4. Immediately after the program: review your notes to refresh your memory. If there were references to additional resources, check those out while you’re still excited about what you learned.

5. Once you’re back at the office, share the material with a colleague or a group in your firm. Discuss how you can use the new information in your current work. Teaching others helps you retain the information and it promotes a positive cycle of organizational learning.

Sorry for all the extra work, but I think you’ll be glad you put in the extra effort. I hope in your next training with CPE Link or other provider, you take back a tip that will bring in new business or save your firm time in a key process area. Happy learning!

Most of us would quickly respond with a profound “yes” in answer to the title question. After all, cash is highly susceptible to misappropriation and falsifying cash disbursements is the means for perpetrating and covering most frauds. In spite of this, my answer would be, “not always!”

In 1995, I began instructing classes on risk-based auditing. As we all realize, the concepts of risk-based auditing underpin the risk assessment standards that became effective in 2007 and, in fact, have guided most auditors for decades. At one of my in-house seminars for a smaller CPA firm, a senior accountant shared that her previous employment was with an international CPA firm. She said that during her last three years with that firm as an in-charge accountant, none of the audits she ran contained detailed cash tests of balances procedures! Tests of controls, analytical procedures, and reasonableness reviews of reconciliations and bank transfers and bank confirmations were the extent of cash auditing procedures.

Most auditors of smaller entities would respond: “Yes, but her clients were big with good internal control systems. My small clients are small and have none!” Maybe you simply thought, “I could never NOT audit cash!” Let me seek middle ground by saying that, at a minimum, we probably don’t need to audit cash to the extent most of us are accustomed! Why? Please read on.

Our audit strategies for both large and small engagements must include sufficient risk assessment procedures. These procedures normally include obtaining and documenting an understanding of a client’s accounting and internal control systems (primarily its key controls). At a minimum, a systems walk-through procedure for 5 to 15 of each type of transaction would accompany flowcharts or memos describing transactions cycles. Larger or regulatory audits may include tests of controls for all assertions at the transaction level. Risk assessment procedures should also include documentation from reading the general ledger, either by sight or by using computer-assisted auditing techniques. At the completion of these procedures, an auditor should have a good understanding of a client’s business and its accounting and internal control systems.

If the results of the risk assessment procedures indicate that the risk of material misstatement for cash is high, then detailed tests of balances for cash may be necessary.
In all but the worst cases, however, risk is usually some level less than high. Further, auditing procedures for most other financial statement classifications affect cash in some way. Finally, cash balances are often not significant when compared with other financial statement classifications.

So when risk of material misstatement for cash is less than high, what auditing procedures are normally necessary? Here are my suggestions when risk is slightly less than high:

• Always request confirmations of bank balances and cutoff statements (or inspect electronic statements on a bank’s website). Significant frauds have been covered up by falsifying and reproducing bank statements.

• Request bank statements and reconciliations at yearend for the largest one or two bank accounts. Trace a few larger reconciling or unusual items, and the statement balance, to the cutoff statement and/or subsequent month’s bank statement. Only trace additional reconciling items if errors are discovered.

• If no significant errors are discovered, compare bank balances on yearend statements to bank confirmations or electronic statements. Review remaining statements and reconciliations for reasonableness, looking for unusual items and evidence of significant interbank or intra-bank transfers. Review cutoff statements for evidence of such transfers.

• If significant errors are discovered, consider completing detailed auditing procedures for all bank reconciliations.

• Write a memo describing the audit procedures performed (or refer to the audit program), exceptions that were identified and resolved and how the cash audit objectives have been accomplished.

Do we always have to audit cash? Not always! Using our professional judgment based on the assessed level of risk can enable us to reduce auditing procedures to a minimum, even for cash!

Guest blogger, Larry Perry, CPA has over 40 years experience as a CPA practitioner. He is an author of accounting and auditing manuals, and an author/presenter of live staff training seminars, webcasts and self-study CPE programs. Larry is a popular webcast instructor with CPE Link.

Growing up in the CPA profession I was taught that auditors performed tests of controls so they could reduce detailed tests of balances. Unfortunately, very few of my supervisors were ever brave enough to make those reductions! Until the risk assessment standards of 2006, we mostly declared the benefits of internal control non-existent and defaulted to maximum control risk and maximum tests of balances. Clinging tightly to yesterday’s audit traditions, we have simply added procedures to comply with the requirements of the new standards. Increased time charges and lower engagement profitability have been the results!

Presenting a live auditing seminar this week, some truth bubbled to the surface. Two participants indicated their firms performed tests of controls only when required to do so. Even when a CFO had spent considerable time designing and operating a good internal control system, these firms paid little attention to internal control in designing their auditing strategies (or in preparing their invoices!). No matter what, they always perform maximum tests of balances! This tradition is still alive! Another participant said his firm often performs tests of controls but unless control risk can be reduced to low, they don’t utilize their results to reduce tests of balances. As it has been for years, this tradition is often spelled “over-auditing!”

For about 20 years after quality control standards were introduced in our profession, most of us struggled just to comply. We often did more audit work than was necessary in hopes we would meet all the requirements of professional standards. The “cover your assets” principle of conservatism found its way into all our attest services. We probably achieved some level of quality with these traditions, but they didn’t make us much money!

It may be a surprise to many auditors when I state that the risk assessment standards of 2006 were intended to help us make more money! These standards made it clear we can rely on tests of controls, even on other risk assessment procedures like reading the general ledger and a systems walk-trough procedure, to reduce control risk to some level less than high. Further, the prior year’s control risk assessment sometimes can be used to reduce control risk in the current year.

When control risk can be reduced to any level less than high, we can save time (and make more money!) by performing fewer, less reliable tests of balances procedures! Our goal should be to perform enough risk assessment procedures to reduce control risk to some level less than high. Our audit planning on every engagement should focus on reducing tests of balances. We must let go of the tradition of over-auditing to maximize engagement profitability!

Our traditions often fade when we begin exercising professional judgment. Exercising professional judgment is the foundation of our risk assessment standards. Conservatism is actually compliance with professional standards, not accumulating audit evidence beyond that which we need! Quality is doing only what is required to accomplish our assurance objectives, nothing more!

It’s time to re-evaluate our audit traditions.

Guest blogger, Larry Perry, CPA has over 40 years experience as a CPA practitioner. He is an author of accounting and auditing manuals, and an author/presenter of live staff training seminars, webcasts and self-study CPE programs.

Imagine this situation. Building contractor Jones has asked CPA Smith to review payables and receivables. “I want to be sure that our vendors have billed us as agreed,” says Jones. Smith wants to send a staff person to Jones office to compile the information into an Excel worksheet for further analysis and reporting.

How can Smith design a spreadsheet for data entry and analysis that
• helps speed data entry, is easily modified, and is responsive to changing assumptions?
• provides instructions to guide the data entry process?
• is also suitable for presentation to the client?

What’s more, since Smith won’t be doing the data entry himself, how can he include automation to give feedback during the data entry process and provide validity checks to prevent “garbage-in garbage out” problems?

If you don’t know the answers these questions and would like to, you may want to participate in the May 12 webcast Building Interactive Excel Spreadsheets for Data Capture.

Or consider this problem. A frantic client calls Ray Knight, CPA and owner of Knight Consulting. “My accounting software won’t work, the software vendor is out of business, and the data isn’t compatible with any other available software. Help!”

Ray helps the client set up another accounting software package for current year operations, but the client still needs access to information from prior years. Ray received a data dump from a recovery specialist and is considering the next steps. What issues should Ray consider when integrating data for use in Excel? How can he modify the dataset? How can he design a spreadsheet that will provide interactivity with the client for ad hoc analysis and reporting? You can find out the answers to these and more questions in the May 12 webcast Using Excel with External Data.

Can’t make the May date? No worries. Both webcasts will be presented again in July by L. Keith Jordan, CPA. In addition to 30 years experience in accounting, supervision, and management, Jordan is an expert in IT and business applications.

Why not make a day of advancing your Excel skills?

How are your Excel skills? Average? Enough to get by? Have you ever thought that with just a little training, you may be able to get your work done faster, and maybe reduce the errors that occasionally sneak in?

One of the best ways to learn more about Excel, discover shortcuts and time savers is through webcast training where the instructor demonstrates directly in Excel. You see the click-by-click steps needed to perform each function. You can follow along and ask questions. And, if you didn’t fully absorb the information, you can view the recording of the presentation again for additional review.

In response to the popularity of Excel training, CPE Link has built up its Excel curriculum to include over 20 specialized topics geared towards CPAs. Some of the more popular presentations are: Mastering Excel Pivot Tables, Tips and Tricks for Creating Charts, Mastering Advanced Excel Formulas, Automating Excel-Based Financial Statements, and Introduction to Macros. In these sessions, attendees learn practical solutions to everyday challenges.

If you haven’t experienced Excel training in the webcast format, I invite you to try before you buy! Take a peek at this FREE Excel Speed Tips on-demand webcast (a $49 value). In this 3 CPE credit self-study course Excel expert David Ringstrom, CPA shares the features and shortcuts that can make you an Excel power user. Offer expires May 31.

I am pleased to report that CPE Link has received its NASBA approval for Self-Study delivery. As a member of the NASBA Registry, we are now approved to deliver Group-Internet Based and Self-Study programs.

This approval allows CPE Link to serve financial professionals in those states whose Accountancy Board requires CPE providers to be part of the NASBA Registry—a group we previously had to turn away.

As a NASBA registered sponsor, we commit to the delivery of high quality continuing professional education in compliance with the Statement of Standards for Continuing Professional Education (CPE) Programs (Standards) and the program requirements of the National Registry of CPE Sponsors.

CPE Link also has its own very high quality standards for its programs. We monitor participant evaluations on a daily basis. If any score does not meet our internal benchmarks, we make adjustments where necessary to improve the quality of the materials, and the user’s experience.

CPE Link has over 400 hours of self-study course content currently available. Some of our most popular self-study courses include: Small Audits Made Easy and Profitable, Excel Speed Tips, Beyond VLOOKUP: Mastering Advanced Excel Formulas, Professional Conduct and Ethics, Federal Tax Updates, and Compilation and Review Engagements.

We also continually pilot test new courses. There are usually a dozen or so programs in the pilot test phase of development. To qualify as a pilot tester, you must be a licensed CPA.