Choosing the Right CPA

By Frank Sisco

Copyright 2000 Frank Sisco

Choose wisely
Treat the decision of choosing the right CPA like you do choosing a good friend, business partner or a trusted companion. 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 acumen to analyze and interpret 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.

As a CPA for over 25 years, having worked for a big CPA firm like PriceWaterhouseCoopers and in my own practice with associations with many other CPAs, I’ve had hundreds of clients whom I’ve served in many different capacities. I think this gives me a reasonably good perspective on the matter of choosing the right CPA. Also, I think I can offer insight from the failure side as well as the success side of the equation. I’d like to think I’ve served all these clients very well, but actually I know I’ve fallen short in more than a few instances. In some cases, I did not have the specialist experience required but was driven to try to help the client and so I learned on the job, disappointing myself and the client. Never hard feelings but disappointing nonetheless. In other cases, our personalities were so at odds it made it quite difficult to communicate. Now I believe I’m a better communicator, especially at the outset of the relationship when the client and I explore our mutual expectations. I’ve learned from these mistakes and I take solace in the popular saying of Thomas Watson of IBM that “the surest way to success is to double your failure rate.” You need to find a CPA who has made mistakes but has grown from them.

How do you develop a good short list of candidates? Talk to business associates, friends, colleagues in community activities, and other professionals such as your attorney or insurance agent. Review the field efficiently by checking the internet. Websites such as www.CPAdirectory.com greatly help the search process by enabling you to search on key data such as location and specialty, and then view websites with detailed info for those CPAs who have enrolled.

What’s a CPA
CPA stands for Certified Public Accountant, although the term is much narrower than the role 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, most CPAs do indeed live up to the higher level of respect they enjoy compared to other professionals, as research tells us. Their keen ability to analyze data, record it, interpret and compare it, make them a critical ally in many if not most important personal and business decisions. They tend to be more objective and independent, as a result of their 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, back 17 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 and a licensed insurance agent. Now the choices are wider and perhaps less time-intensive for the CPA, such as the designation of Personal Financial Specialist by the American Institute of CPAs following certain additional training and testing and a lot of hands-on experience. All in all, the changing roles have been welcomed by both CPA and clients.

When a need arises for a new CPA
Okay, your CPA just told you that she is moving two thousand miles away to be CFO of an internet start-up. Or, your CPA succumbed to the temptation of a liquidity event, sold his practice and plans to be the operator of a small for-hire fishing boat. Or you survived until now without a paid CPA, but now with all those stock options and complex partnership arrangements in your small business which is finally getting large, you know 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, and soon.

So why do you need help in choosing the right CPA. After all, you’ve been a pretty good judge of people up until now using your instincts and interview skills. Well not counting that computer engineer you hired who took twelve days to just set up your network properly. And you would rather forget about that ring-on-each-finger lawyer who Uncle Bill raved about. Luckily, you did not go into a comma while that faulty no-tax-ever revocable trust was still in effect before you revoked it. Thinking about it, you should have at least spoken with your gatekeeper primary physician before picking her. And your dentist could do a much less painful job if he upgraded his equipment and did not get so aggressive with that metal pick looking for cavities. Also, if he turned down the air-conditioning, he would probably sneeze much less while drilling, and your gums would be quite thankful. And what about that real estate agent who helped you buy your first house. She must have known about the cracked pipe to the septic tank and the county parkway that created a 95 decibel torrent of sound within nine months of your purchased home. What did you do wrong in selecting those professionals?

Although it’s not as important as choosing a spouse or a business partner, choosing the right CPA to help you is quite important. The right one could get you out of a mess, or keep you from one, 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 make right.

Guidelines
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 to help you transform your business into an e-commerce powerhouse. And choosing an individual CPA, or small CPA firm, is miles away from selecting a worldwide CPA firm of hundreds of partners and scores of specialties. But certain common factors apply about the particular CPA with whom you will have contact.

Your CPA should:
1. 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. Be more honest than you with a higher level of integrity.
You need someone to hold you back from crossing the line.

3. Have an office location within a quick car ride so you can meet personally whenever needed, including early mornings, evenings and weekends.
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. 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. 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. 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. 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. Do what she says she will do.

9. Charge fairly for services. Be flexible in billing and be willing to work on a “value basis,” charging you for value she delivers versus time she spends.

10. Have a great network of associates whom he can use as a resource to supplement his own knowledge.

11. Enjoy learning and being creative, always on the look-out for innovative ways to help you.

12. Conduct their 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, management of files and records, etc.

1. Have you helped a client in a similar situation?
It saves time to work with a CPA who has already dealt with similar situations. Probe to discover exactly how he has dealt with problems similar to yours.

2. Will my company and/or I be serviced by you, a partner or by junior accountants?
Many CPA firms train new associates at the client’s expense. Be sure that you get what you pay for.

3. What are the nature, scope, and timing of your work, and what will it cost me?
Often, a CPA’s work plan can be more extensive and more expensive than you might expect. Get the accountant to be specific about what he or she will do, and get a detailed written letter and cost estimate.

4. How are your fees calculated? Will you be charging me for every phone discussion?
To avoid friction later, it is essential to discuss the CPA’s fee structure. If the CPA uses a time-based system, discuss the hourly rate of the accountant and staff, overhead expense reimbursement (what is the cost of a fax?) and whether certain time is not billed. Discuss alternatives such as value billing which could base the fees on a percentage of certain value realized from creating and helping to implement strategies (e.g. cost reductions from restructuring operations; the present value of estate taxes saved)

5. Can you give me two or three quick ideas on how you might be able to save our company money or me personally?
A good CPA should have sharp business acumen and be creative. A question like this can show whether the CPA can call on his or her many skills to truly help your business to increase profits, improve productivity, trim costs, enhance return, and lower taxes, or in a personal planning context to achieve financial goals, partly through enhanced investment returns, lowered taxes, reduced costs, and coordinated and simplified budgeting and planning.

6. Can you tell me a little about your practice, and your success and failures?
Open-ended questions can elicit a wealth of information. Let the CPA talk. You will also learn a lot about the CPA’s priorities, risk-tolerance levels, and various personality characteristics, all of which can be helpful in gauging compatibility.

7. What can I do to help you with your work and keep your fees to a minimum?
A great deal of your accountant’s time can be saved by preparing information beforehand. Find out if your CPA is willing to work with you to offload this work to your firm.

8. How will you be communicating the results of your work to me?
The results of an audit usually take the form of an audit report, and tax return preparation yields tax returns. But this work also can lead (and should lead) to many suggestions by the CPA on how to cut taxes, increase income, restructure investments, build business, and improve information. Some CPAs are more comfortable with interactive discussions and others prefer written action reports. In addition, specialists such as Personal Financial Specialists should be able to provide you with financial planning memos and reports to organize the many ideas on improving your financial health. Ask to see examples.

9. Do you perceive any conflicts of interests?
CPAs work for dozens of firms and scores and sometimes hundreds of individuals. You should inquire if any of your direct competition is represented by the firm. If so, inquire as to how this conflict is handled.

10. How long have you been a Certified Public Accountant, and what other licenses do you hold?
You should inquire with the state CPA organization to discover if there have been any disciplinary actions entered. Some accountants also have credentials as financial planners (PFS), securities representatives, business valuation experts, even lawyers. Check web directories and websites (e.g. www.CPAdirectory.com).

11. How well have you integrated computers and the internet into your practice, and has it enabled you to do more for clients at less cost?
Integrating your computer files with those of your CPA’s files can save time and money, and increase accuracy. Doing so over the internet makes it even simpler. Find out how your CPA uses the internet. Does she have her own website,and if so check it out and ask questions about the resources available on it. Find out how you can interact with her and her computer systems to make work flow more efficiently and enable you both to stay in better touch.

12. Will you need to overhaul our current system ?
Your internal bookkeeping and cost-accounting systems are expensive to alter. Find out up front whether you can integrate with the firm’s systems.

13. Are you conservative or aggressive in interpreting tax laws and regulations, and accounting and auditing standards?
Save yourself the hassle and be certain that your accountant approaches your books in the same way you would.