September 30, 2020

Accounting News Roundup: Non-CPA Managing Partners and Bad Accountant: Caught on Tape! | 08.01.16

Non-CPA managing partners

Does the managing partner of an accounting firms need to be a CPA? If we assume that a managing partner’s duties include setting the overall vision and running the day-to-day operations of the firm, I think the answer is, “No.” If we also assume that a managing partner is the best business person and not just the best CPA in a particular office or firm, then I think the answer is also, “No.” But then again, it’s probably simpler to think of a “managing partner” as a “CEO” and then ask, “Does the CEO of an accounting firm need to be a CPA?” and, again, the answer to that question is, “No.”

However, in some states, like Massachusetts, that’s not possible:

[I]n Massachusetts, only certified public accountants, or CPAs, are allowed by law to serve in one of the highest positions at an accounting firm: managing partner. Firms are concerned that without the prospect of their name on that corner office, those employees who are driving growth will leave the industry — or talented MBA graduates and lawyers won’t enter the sector to begin with.

A bill has passed the Mass. Senate and is sitting in the House Ways and Means Committee now, but the session ended yesterday and there was no expectation that it would advance in time. It’s possible that it will get picked up in session later this year.

The larger point, however, is that it seems silly that non-CPAs would be ineligible to run a CPA firm. Accounting firms are businesses, so they need to be run by competent business people in order to succeed. Why shrink the pool of candidates down to only CPAs? I’d venture to say that most CPAs are not great business people and therefore, should not be a managing partner of a firm. If laws on the books prevent firms those non-CPAs from being CEO/managing partner, they’re at a pretty big disadvantage when it comes to choosing from available candidates.

Donald Trump’s tax returns

Our long national nightmare that is Donald J. Trump continues and for our little corner of the internet, this involves his tax returns (or lack thereof). This Washington Post article runs through of what is known about Trump’s income and the taxes from the last 40 years. The most fascinating part is from 1984 when he contested “a city business tax on his gains from selling a condominium unit” the details of which were first reported by David Cay Johnston back in June. The tax return from ’84:

reported no personal income in his 1984 federal income tax but reported a $2,365,352 capital gain from the sale and total deductions of $626,264. Yet Trump had not provided documentation justifying the deductions.

Trump’s principal business activity for that return was “consulting” and if you think that’s suspicious, get a load of this:

Trump provided a photocopy of his tax return, which had the signature of his longtime accountant, Jack Mitnick. But Mitnick testified that neither he nor his firm prepared the tax return and that he did not know who did. Johnston wrote: “Among the issues raised by Mitnick’s 1992 testimony is whether Trump or someone acting on his behalf substituted a return that he or someone else prepared and then transferred Mitnick’s signature using a photocopier.”

Some clients like to get creative! Most don’t run for POTUS, though.

Accountants behaving badly

James Flynn of Delray Beach, Florida allegedly passed 28 forged checks drawn on the account of his employer, and the evidence sounds a little overwhelming:

Video surveillance shows Flynn unlocking the door to another employee’s office and taking the company CFO’s signature stamp, according to a police report. Video later shows him returning the stamp, locking the office and leaving. Shortly after he cashed the check at Tony’s Market.

A piece of advice: if you ever find yourself sneaking into a co-worker’s office to forge a check with the intent to cash it at a Tony’s Market, please take a minute to reflect and identify where things have gone wrong in your life.

Previously, on Going Concern…

I wrote about a lawsuit against PwC that’s going to trial in Florida. And in Open Items, someone wants to know if a master’s in accounting will help them get a job at a public firm.

In other news:

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