This article was published in the "Martinelli Newspapers" in the March 9, 2006 weekly issue of The Westchester Crusader, The Rye Chronicle, The Eastchester Record, The Pelham Sun, The Sound View News Home News & Times, The Mt. Vernon Independent, Harrison Independent
and North Castle News

Life and Money - Choosing the Right CPA - Part 1

By Frank Sisco, CPA, PFS

(Word count =  1,669 including 73 words for About the Author)

This week's column begins the discussion of choosing the right CPA (Certified Public Accountant) for you or your business.

 Choose wisely

Treat your decision of choosing the right CPA like you would in choosing a good friend, a business partner or a trusted companion. After all, you will be trusting that person with very confidential important information about yourself and your business, and the related decisions that are made can significantly affect your life. Be thorough, interview several candidates, explore common ground for values, integrity, and philosophies about life, check out the CPA’s listening skills as well as his or her acumen in analyzing and interpreting data, and also trust your instincts on recognizing solid character traits. If you don’t think you could spend a weekend at the beach, or at least a two-hour dinner, with the prospective CPA, then she or he is probably not right for you.

Choosing the right CPA could get you out of a mess, or keep you from one, help to make your life simpler, be a great sounding board for key financial decisions like buying a house, starting a business or retiring, etc. The wrong one could get you in trouble with the IRS or SEC or worse, or steer your financial ship way off course, which could take years and many thousands of dollars to fix.

What is A CPA?

CPA stands for Certified Public Accountant, although the term is much narrower than the role that many CPAs fulfill. Certified Professional Advisor, as a leading CPA once proposed, is probably more apropos. Because of stringent requirements for education, experience and testing, and because of an auditor's independent role, most CPAs do indeed demonstrate trustworthiness.  In the last several years, however, the trust factor has been tarnished by major falls from grace by senior accounting executives (e.g. Enron, WorldCom, etc.) and CPA firms (Arthur Andersen).  A CPA's keen ability to analyze, record, interpret and compare data makes her or him a critical ally in many if not most important personal and business decisions. A CPA tends to be more objective and independent, as a result of initial training as an auditor.

Most successful companies have CPAs within the top inner circle of management or advisors. Some large CPA firms have very large influential worldwide business consulting practices, helping companies to retool themselves in a quickly changing world. The CPA’s role is also changing rapidly. Some changes make a lot of sense for the CPA and consumer alike, such as the CPA’s role as personal financial specialist. After all, CPAs are good at relationships and serving clients, recognizing needs and developing strategies after careful analysis and consideration of many interrelated aspects of a client’s financial life. Many CPAs are specializing in serving individuals (who are often professionals and small business owners) in the many facets of personal finance. In my own case, about twenty years ago I felt that in order to serve clients well in personal finance including financial planning, I needed to become a licensed (Series 7) stock and bond broker, a registered investment advisor, an accredited estate planner, a licensed insurance agent, and later a principal (Series 24). Now, it is less time-consuming for aspirant CPA planners because of the designation of Personal Financial Specialist by the American Institute of CPAs after getting certain additional training and testing and a lot of hands-on experience. All in all, both CPA and clients have welcomed the changing roles.

Planning for your needs.

Know your needs first, and then plan how to choose the right CPA. Your needs for a CPA could be extensive and long-standing or limited and short-term.  Here are a few examples.  Your current CPA may have told you suddenly that she is moving two thousand miles away to be CFO of an internet start-up, and you had relied on her for nearly all your accounting and tax needs for your business.  Or, your CPA may have sold his practice and plans to be the operator of a small for-hire fishing boat, leaving no partners behind to take on the clients. Or you got along fine until now without a paid CPA, but now with all your stock options and complex partnership arrangements in your small business, which is finally getting large, you need someone with good analytical skills and tax acumen to help you navigate through. Or you just moved here from the other coast and you know you need help on getting your financial life set up properly, and soon.  Or, you want to restructure the ownership of the many family assets to enable better estate planning.  Or, your financial situation is too complex to trust yourself doing your own tax return or running hypothetical projections for retirement or other major financial decisions.

Choosing a CPA to audit your small business is much different than choosing a CPA to prepare your personal or business tax returns or to help you with financial planning matters.  Steve Serwatka, a CPA and partner in Arthur Allen & Co., located in Stamford, Connecticut suggests that the CPA you choose for an audit of the financial statements of a company, even a small one, should meet at least three criteria:  (1).  Is very experienced in auditing, not just in accounting and tax, and preferably has extensive auditing experience in the same industry as your business.  (2) Undergoes an annual peer review and satisfy continuing education requirements by taking auditing courses for CPE credits, and (3) Is independent, in fact and in appearance.

Furthermore, choosing a CPA to prepare a relatively uncomplicated tax return is a lot different from choosing one to help you plan your financial future, or selecting a CPA as a financial consultant to help you transform your business into an e-commerce powerhouse. And, of course, choosing an individual CPA, or small CPA firm, is very different from selecting a worldwide CPA firm of hundreds of partners and scores of specialties.

When choosing the right CPA, he or she should have these traits.

Although the extent and type of expertise and experience of the CPA will vary greatly based on your particular needs, these are at least twelve common traits that a CPA "should" have.

(1).  Should excel at serving people. She should enjoy her work, and take genuine pleasure from helping people like you. Explain your preferences and what bothers you, and see her reaction. Ask her what are her preferences and what bothers her. It will be telling.

(2).  Should be more honest than you with a higher level of integrity. You need someone to hold you back from crossing the line.

(3). Should have an office location within a quick car or train ride so you can meet personally whenever needed, including early mornings, evenings and week-ends. The convenience of emails and phones is great, but getting alone with an advisor in the flesh, looking face to face is a must if you want someone to really know you, understand your goals, and think of you during their day. And availability during off hours is a plus.

(4).  Should be well experienced in the areas you need, but also a good generalist.

 If you need help with sophisticated personal financial planning strategies, do not hire a CPA who spends 90% of his time preparing financial statements for small businesses, and visa versa. Check not only his credentials and references, but evaluate him by discussing examples of situations like yours. Avoid being a CPA's on-the-job training.

(5).  Should be a good communicator, both listening and speaking. It’s also important for your CPA to know she can tell you when she had made a mistake, and right away. And no matter how embarrassing, you need to be able to tell her about circumstances that arise which might affect your financial health or of your immediate family members who may need help.

(6).  Should get along well with all kinds of people. Not only does she or he need to get along with you, but also with your spouse and your other advisors, and perhaps your children, parents and others who get included in family planning matters. She or he should be, as much as possible, a world citizen in this diversity-minded age.

(7).  Should demonstrate being attuned to matters of the heart and soul as well as the mind. What matters most in life in the end are the relationships we’ve had and how we’ve shared our love with others. If the prospective CPA does not seem to care about her own family and friends and clients to the degree you care about people in your life, consider another person.

(8).  Should do what she says she will do.

(9).  Should charge fairly for services. She should be flexible in billing and be willing to work on a "value basis", charging you for value she delivers versus time she spends.

(10).  Should have a great network of associates whom he can use as a resource to supplement his own knowledge.

(11).  Should enjoy learning and being creative, always on the lookout for innovative ways to help you.

(12).  Should conduct his or her own business and personal affairs in a reasonably efficient and sensible way. Ask questions about the CPA’s approach to getting and serving clients, the role of staff, the use of technology including computers, communications equipment and the internet, ways of keeping current, research methods, and management of files and records.

This article continues in next week's column, which will offer thirteen questions that you should consider asking the prospective CPA.

___________________________________________________

About the author

Frank Sisco is a CPA and Personal Financial Specialist, and author of several articles about personal finance and issues of life and money.   His firm, Financial Management Corporation, is located in Harrison, NY.  Frank makes his home with his wife and daughter in New Rochelle, NY.  He can be reached at 914.381.3737 or by email at ideasmoney@aol.com, or visit his website at www.LifeAndMoney.com which contains this and prior articles.