Managing risk is imperative for successful leadership in today’s business world. Leaders must develop processes like enterprise risk management (ERM) to improve their ability to manage risks effectively. ERM cuts across an organization’s silos to identify and manage a spectrum of risks. Consider these ERM action items: Resolve to
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TOPICS
Management accounting
Highlights
The SEC’s Committee on Improvements to Financial Reporting voted in January to support a slate of preliminary recommendations designed to make the information presented by U.S. public companies more useful to investors while reducing the complexity of the financial reporting system. The preliminary proposals included a call for
Allocating Value Among Different Classes of Equity
EXECUTIVE SUMMARY It is essential for board members, executive officers, CFOs, auditors and private equity investors to comprehend option-pricing models used to determine the per-share values of common and preferred shares. The AICPA Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation , describes three methods
From the Defense: How to Combat a Deepening Insolvency Claim
In 2007, I represented Grant Thornton in its challenge of a deepening insolvency claim in Minnesota. The decision by the Minnesota Court of Appeals in the case—Julia A. Christians, Trustee for the Bankruptcy Estate of Technimar Industries Inc. v. Grant Thornton LLP—could provide useful lessons for accounting firms. Technimar planned
High Court Bars Secondary Liability in Securities Case
The U.S. Supreme Court ruled in a major securities fraud case that secondary parties—essentially aiders and abettors—can’t be held liable when the companies they work with mislead investors. Stoneridge Investment Partners LLC v. Scientific-Atlanta Inc., et al., docket no. 06-43, threatened to expand the reach of investor lawsuits beyond parties
Vendor Management Tips
Selecting the right vendors and properly managing vendor relationships can help protect your company from damages and long-term losses. As more work is outsourced to specialized vendors, companies face greater exposure to fraud, security breaches and the possibility of financial losses. When companies outsource, they are still responsible
Boards Driving Enterprise Risk Management
More than half (55%) of risk, audit and finance executives said their corporate boards are leading ERM (enterprise risk management) programs, up from 49% in 2004, according to a report from The Conference Board. One-third of participants serving a core business function—legal, CFO, CEO or corporate board member—considered ERM to
Capture and Share Firm Expertise
BUSINESS TIPSIn a recent CCH survey, accounting firms associated several benefits with having formal knowledge management programs, such as an increase in efficiency (76%), productivity (63%) and revenue (62%) and an improvement in client service (69%). These firms were also more likely to follow other management best practices, including: Using
Mastering the Payment Card Industry Standard
EXECUTIVE SUMMARY Becoming familiar with the Payment Card Industry Data Security Standard is a prerequisite to understanding the regulatory environment in which many businesses that accept credit and debit cards operate. PCI dovetails with a CPA’s core competencies in attest work, risk management, internal audit support and fraud
Risk Assessment Standards in Action
Eight standards rolled out in 2006 by the Auditing Standards Board are sparking a cultural shift for auditors. The standards—Statement on Auditing Standards nos. 104–111—are designed to enhance auditors’ responses to audit risk and materiality and encourage them to focus on areas with the greatest risk of
Audit Committees Should Lead by Example
The authors of “ Eight Habits of Highly Effective Audit Committees” (Sept. 07, page 46) have identified relevant recommendations. However, these recommendations are for an audit committee that is a new body in the governance of a company or one in a company where formerly the audit committee merely listened
Make Direct Marketing Pay Off
EXECUTIVE SUMMARY Direct marketing has become a popular and successful form of CPA firm marketing with the following potential benefits: The process encourages you to define a very specific target audience of prospects most likely to buy your services. The format enables you to develop a specific message
Management Accounting Research for the C-Suite
This second installment in a series of columns on accounting research summarizes results from the field of management and cost accounting. The 2006 through June 2007 issues of five top-tier journals in management and cost accounting research were examined. Those publications included, alphabetically, Accounting, Organizations and
The Human Element: The Weakest Link in Information Security
EXECUTIVE SUMMARY Social engineering attacks involve the use of deceptive or manipulative tactics on an individual to gain a result—often to gain unauthorized access to information assets. The practice sometimes is referred to as soft hacking and often is used to gather intelligence for a subsequent hacking
Tools for Financial Analysis
What do you do when a client asks you to look beyond the standard financial statements and help develop financial goals, forecasts and what-if scenarios? If you’re like many accountants, you’d hunker down with a spreadsheet and begin cobbling together an array of custom worksheets. Then you’d probably spend several
Building Long-Term Value
EXECUTIVE SUMMARY To maximize the long-term financial performance and value of a business, CPAs should help management focus on two key components of value creation: revenue growth and achieving a return on invested capital (ROIC) in excess of the weighted average cost of capital (WACC). A lower WACC
Accounting for Gift Cards
EXECUTIVE SUMMARY The accounting for gift card sales presents an emerging reporting dilemma for retailers. Unresolved reporting issues stemming from the reporting treatment of gift card sales and “breakage” (gift cards that consumers fail to redeem) potentially involve several accounting regulations, including standards for revenue recognition and the
An Ounce of Prevention
Sarbanes-Oxley programs that address both compliance and business objectives can help companies trim the costs of section 404 compliance. The 404 Institute’s third annual Benchmark Study found that companies with low compliance costs and more effective outcomes reported a: Higher degree of centralized transaction processing and control. Higher percentage of
Assessing Fraud Risk
Every organization faces some risk of fraud from within. Fraud exposure can be classified into three broad categories: asset misappropriation, corruption and fraudulent financial statements. Answering the following 15 questions is a good starting point for sizing up a company’s vulnerability to fraud and creating an action plan for lessening
Headaches and Stretched Agendas for Audit Committees
A survey of 282 audit committee members—sponsored by KPMG’s Audit Committee Institute (ACI) and the National Association of Corporate Directors—reveals that while oversight of accounting judgments and estimates and SOX 404 compliance remain the top priorities of audit committees, the panels are increasingly focused on information technology risks. Only 15%
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How to find the right CAS clients
The key to success with CAS is selecting the best clients. Tools like ideal client profiles (ICPs), buyer personas, and even artificial intelligence can help identify the businesses that best fit each CAS practice.
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