Author: GoingConcern

Here are Five Essentials to Successful Mentoring

The following post is republished from AccountingWEB, a source of accounting news, information, tips, tools, resources and insight–everything you need to help you prosper and enjoy the accounting profession.

It is such a wonderful feeling to see that many of your firms are taking REAL action steps towards creating a culture of mentoring within your firms, a culture that is “alive and healthy.” It is not just a document, laying on a shelf somewhere that some people follow and some don’t.

In a successful mentoring connection, the mentor and the mentee must both want the relationship to work and be willing to commit time and energy to the process. Five elements are essential:



Respect: This is established when the mentee recognizes the knowledge, skills, and abilities of the mentor and when the mentor appreciates the success the mentee has reached to date and the mentee’s desire to develop to their full potential.


Trust: Mentors and mentees should build trust through communicating and being available, reliable, and loyal.

Partnership Building: The mentor and mentee are professional partners. Barriers that partnerships face may include miscommunication, an uncertainty of each other’s expectations, and perceptions of other people. In order to overcome these barriers, they should work together to maintain communication, address and fix obvious problems as they occur, examine how decisions might affect goals, and have frequent discussions on progress.

Realistic Expectations and Self Perception: A mentor encourages the mentee to have realistic expectations of the mentee’s capabilities, the amount of time and energy the mentor can commit to the relationship, and what the mentee must do to earn their support for his/her career development. The mentor gives honest feedback when discussing the mentee’s traits, abilities, talents, beliefs, and roles.

Time: Set aside the time to meet, even by e-mail or telephone. Don’t change times unless absolutely necessary. Control interruptions. Frequently “check in” with each other via informal telephone calls or by e-mail.



What Do We Make of The Sage and SAP Rumors?

The following post is republished from AccountingWEB UK, a source that delivers topical, practical content to accountants and accounting professionals.

Merger rumors. What would we do without them? The past decade or so of my professional life has been shaped by the regular appearance of bid rumors around Sage, usually of the “who are they going to buy this week?” sort.

So you can imagine my surprise to hear on the grapevine that Sage’s share price had surged almost 5% on Tuesday night on rumors that it was an acquisition target for SAP, with Microsoft and Gapgemini reported to be sniffing around the undergrowth in Newcastle too.

I’m not a stock market analyst, so I don’t really need to chase geese like this, but I couldn’t help myself from doing a little background checking. The Daily Mail appears to have broken the story, without naming sources, around 10:30 pm on Monday night. By the next morning, Reuters and numerous other outlets had picked up the trail and various analysts were puffing up the story with blogs and tweets.

There was a tweet from China Martens at 451 group of “late night activity in Walldorf” to verify that something was up, but with none of the companies involved breaking cover this really was one of those stories where one bit of unfounded gossip was feeding off another.


Years of industry-watching have taught me never to be surprised at what a software company with a wedge of cash in its back pocket can get up to, but neither SAP or Microsoft strike me as being suitable suitors for Sage. Microsoft’s entire business solutions strategy has been in turmoil for years and if it ever enters Steve Ballmer’s consciousness, my guess is that he wishes the company had never got into bed with Great Plains and Navision.

SAP meanwhile, is everything that Sage isn’t: a technology-focused global monolith that still has trouble thinking of an SME as having anything less than a $500m annual turnover. On this point Dennis Howlett blogged, “So much of Sage’s business is at an end of the market about which SAP has little understanding. Sage is on a declining organic growth curve, has a rat’s nest of code from acquired companies, is propped up by maintenance fees and has a nightmare in the US to manage with the ongoing Emdeon fiasco.”

It doesn’t happen often, but for once I find myself in complete agreement with him.

Strangely, by Wednesday afternoon the rumors had simmered down and so had the share price (although somebody seems to have done very nicely out of the rumors with 1.7m of shares shifted at the peak of the frenzy on Tuesday night).

Now I’ve voiced my doubts, they’ll probably turn around an announce the deal in the morning.

Here’s More Evidence That Complying with Federal Regulations Is a Pain in the A$$ for Small Businesses

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

If you’ve suspected that complying with federal regulations is particularly onerous for small businesses, a new report from none other than the US Small Business Administration will provide you with plenty of new ammunition.

The report, called the Impact of Regulatory Costs on Small Firms and written by the SBA’s Office of Advocacy, estimates just how much it costs very small, smallish and big companies to follow the rules. The conclusion is that businesses with under 20 employees pay the most per worker–$10,585 per employee each year. The cost for businesses with 20 to 499 employees is $7,454 and for firms with 500 and more employees, $7,755.

The reason, of course, is the matter of fixed costs. A small business incurs about the same expense as a larger one. But the big guys can spread the expenses over more revenue, output, and employees, resulting in lower costs per unit of output.

The report, which looked at data from 2008, found that small businesses with under 20 employees pay the most to comply with environmental, tax, and occupational safety and health and homeland security regulations. Most notably, the cost per employee for environmental compliance is $4,101 compared to $883 for the biggest companies.


Clearly the unequal burden of regulatory compliance makes life a lot harder for small businesses and, in fact, serves to undercut their ability to compete. “This potentially causes inefficiencies in the structure of American enterprise, and the relocation of production facilities to less regulated countries, and adversely affects the international competitiveness of domestically produced American products and services,” says the report. “All of these effects, of course, would have negative consequences for the US labor market and national income.”

Still the report didn’t comment on the benefits of regulations. That’s another issue entirely. In fact, just because they cost a lot doesn’t therefore mean the rules shouldn’t exist. It does, however, indicate that something is very wrong with the way they’re applied–and that, for small companies to thrive, change is imperative.

According to the report, economic regulations, which include things like rules related to tariffs, are the only area where large firms have the highest cost. That is due, in part, to the Regulatory Flexibility Act, which requires agencies “to assess the effect of regulations on small businesses and to mitigate undue burdens, including exemptions and relaxed phase-in schedules.” The RFA, says the report, has been particularly effective in shielding small businesses from the cost of complying with the Sarbanes-Oxley Act.

Seems there should be a significantly more concerted effort to exempt small businesses from certain regulations or, at least, to help with compliance efforts. Some 89 percent of all companies in the US employ fewer than 20 people. If the cost of complying with regulations is really egregiously high for the vast majority of companies simply due to their size, it’s incumbent upon the rule-makers to do something about it.

Accountants Still Can’t Not Write Good…or: Improving the Communication Skills of Students

The following post is republished from AccountingWEB, a source of accounting news, information, tips, tools, resources and insight–everything you need to help you prosper and enjoy the accounting profession.

“I am not good at writing. I want to be an accounting major so I don’t have to write.”

All of us who teach or advise students have heard this – our students’ dislike for writing papers. These students are under the false impression that accountants do not have to write, or at least not much.

Frequently, our students do not realize that written communication skills are essentiaprofession. As a matter of fact, communication skills are one of the five core competencies outlined in the CPA Vision Project, tested on the CPA Exam and demanded by employers.


The CPA Vision Project

The CPA Vision Project of the American Institute of CPAs (AICPA) addresses issues we must tackle to keep up with the challenges facing the profession. To remain competitive, CPAs need to demonstrate five core values and five core competencies.

One of the top five core competencies, Communication and Leadership Skills, is the ability to “give and exchange information within meaningful context and with appropriate delivery and interpersonal skills.” These core values and competencies are instrumental in providing the five core services outlined in the CPA Vision Project: Assurance and Information Integrity, Management Consulting and Performance Management, Technology Services, Financial Planning, and International Services.

If we want our students to offer these five core services efficiently and effectively, accounting classes must incorporate the ability to communicate well as a learning objective.

Writing on the CPA Exam

So what about the CPA Exam? Is the profession testing communication skills on the Exam? Yes.

The CPA Exam requires candidates to demonstrate their writing skills. Currently, CPA applicants complete constructed responses on the Auditing (AUD), Regulation (REG), and Financial Accounting and Reporting (FAR) sections of the exam.

With the introduction of the new CPA Exam format (CBT-e) in 2011, writing will remain an important part. However, instead of testing writing skills in AUD, REG, and FAR, the constructed response portion of the exam will be entirely tested in BEC (Business Environment and Concepts). Starting in 2011, CPA candidates will write three essays in BEC.

Entry-level accountants lack written communication skills

The CPA Vision Project demands communication skills and the CPA Exam tests them. Does that mean employers of new CPAs are pleased with new CPAs’ writing skills? No. Many employers of recent accounting graduates complain that their new employees do not possess the requisite writing skills. While our students may have strong technical skills, their written communication is often ineffective and poor.

In addition, accountants are spending less time on gathering, processing, and reporting information, and more time on interpretation and providing strategy and decision support. Accountants prepare notes to financial statements, interdepartmental memos, plans, and proposal communications with various stakeholders, written personnel evaluations, and articles in professional journals.

According to an article in The Trusted Professional, one-third of the accounting firms surveyed are unhappy with accountants’ writing skills. Correctly using grammar, organizing information, and writing clearly, concisely, and completely are necessary for business writing. In the worst case, poor writing skills can lead to dismissal of the accountant or inability to rise to higher managerial levels in the organization.

Because of the CPA Exam requirement and the needs of future employers, writing in accounting classes is an important part of many schools’ accounting curricula.

Communication: The business of accounting

Accounting is much more than financial statements and debits and credits. Properly and broadly understood, accounting is all about communication. Written and oral communication gives the numbers meaning, context, and focus on a decision.

We need to continue working on improving the writing skills of entry-level accountants, but these skills must be further reinforced once students enter the workplace. Firm training and management programs in which writing is given a high level of consciousness and priority will help ensure users have the best product available.

About the authors:
Gabriele Lingenfelter, CPA, teaches accounting and auditing for the Luter College of Business and Leadership at Christopher Newport University in Newport News. Lingenfelter is actively involved on the American Institute of CPAs (AICPA) Audit & Attestation Subcommittee and the development of future CPA Exams. She also is a member of the VSCPA Editorial Task Force. Contact her at gabriele@cnu.edu.

Phil Umansky, CPA, Ph.D., is associate professor of business at the Sydney Lewis School of Business at Virginia Union University and chairman of the Accounting and Finance Department. Umansky is a CPA Ambassador, a regular contributor to the WTVR Virginia This Morning TV Show on money management topics, and a member of the VSCPA Editorial Task Force. Contact him at pumansky@vuu.edu.

Small Business Legislation Could Be a Boon for Small CPA Firms

The following post is republished from AccountingWEB, a source of accounting news, information, tips, tools, resources and insight–everything you need to help you prosper and enjoy the accounting profession.

Included in the Small Business Jobs and Credit Act of 2010 – passed by the House of Representatives September 23 and the Senate September 16 – is the creation of a $30 billion lending fund that will utilize healthy cconduit to increase lending to small businesses – a provision that will generate $1 billion for the treasury, according to officials.

The fund also will provide $1.5 billion in grants to support at least $15 billion in new small-business lending through already successful state-run programs.

Among the $12 billion in tax breaks are a 100-percent exclusion of capital-gains tax on small-business investments made in 2010 and an increase in the maximum deduction for start-up expenditures in 2010 and 2011 – from $5,000 to $10,000.


“Naturally, any change in tax law stimulates our business in that we must provide the analysis of the bill and relay that information to our clients who may be affected,” Perry C. Barnett, CPA, partner responsible for business services for Gainesville, GA-based Rushton & Co. LLC, told AccountingWEB.

Douglas C. Smith, CPA, CVA, a partner with Lawrenceville, NJ-based Bartolomei Pucciarelli LLC, told AccountingWEB that he anticipates a significant increase in tax planning this year due to the provisions outlined in the bill, as well as modest improvement in the business of many of the firm’s clients.

“Almost any new tax legislation is a benefit to our firm, but fortunately, many of the provisions of the bill will benefit our clients, as well,” he added. “Since we are advocates of advanced planning, this bill provides us with the opportunity to make our clients aware of the upcoming changes and perform tax-planning engagements to guide them in implementation.”

While he does not see any significant changes in the firm’s accounting or auditing services as a result of the new legislation, Smith stated there will be consideration of additional accruals of penalties assessed on timely filing of information returns, as well as some impact on deferred taxes as it relates to the accelerated bonus depreciation provision.

The bonus depreciation provision is the most expensive tax break in the bill, weighing in at $5.4 billion over 10 years, but carrying an initial cost of $38 billion in its first two years, according to an analysis conducted by CCH Inc., a Wolters Kluwer business based in Riverwoods, IL, that provides tax, accounting, and auditing software and services.

The bill extends – through December 31, 2010 – 50-percent first-year bonus depreciation that had expired at the end of 2009. The extension is retroactive to January 1, 2010. The bill also extends through 2011 bonus depreciation allowed for property with a recovery period of 10 years or longer, such as personal property used to transport people or other property.

Small businesses will be allowed to write off up to $500,000 in capital expenditures in tax years 2010 and 2011. Under current law, the maximum deduction for tax years beginning in 2010 is $250,000.

Two other provisions in the bill that Smith believes will benefit his firm’s clients are: self-employed taxpayers will be allowed to deduct health-care costs for payroll tax purposes on 2010 returns, and participants in 401(k), 403(b), and 457 governmental plans will be permitted to roll over pretax account balances into a Roth account.

If an amount is rolled over in 2010, the amount is included ratably in income over a two-year period beginning with tax year 2011, according to the CCH analysis. The legislation also allows participants in state and governmental 457 plans to contribute deferred amounts to designated Roth accounts, effective for tax years beginning after 2010.

“Whenever we as CPAs are presented with the opportunity to educate our clients, it is a good thing,” Smith said. “There are many planning opportunities contained in the bill – ranging from the timing of a sale of small business stock, to planning the acquisitions of new equipment to take advantage of the expanded depreciation provisions, to planning the start of a new business that takes advantage of increased deductions for start-up expenses.

“Additionally, with benefits such as the deduction for health insurance when calculating self-employment income, out clients should be able to put a little extra money in their pockets, too,” Smith added.

Barnett agreed that the start-up expenses and the self-employed health insurance changes will benefit his firm’s clients, as well. However, he added that the continual increase in reporting requirements, especially the new requirement for filing Form 1099 scheduled to begin for 2011, could burden some small businesses.

“Based on this law and those in the works, each client will have to maintain a huge database of all vendor payments,” Barnett said. “We see this as a giant logjam for both the business and the IRS.

“The greatest impediment to business moving forward is being confident of what the tax laws are going to be in the future,” he continued. “Until Congress realizes that their indecision in estate taxes and personal income taxes is one of the greatest concerns of everyone, they will not get the economy on track.”

The House approved the bill in a 237-187 vote, while the Senate passed the bill by a 61-38 margin after Republican senators George LeMieux of Florida and George Voinovich of Ohio crossed party lines to support the legislation.

“This is about helping small business owners grow their operations, hire more workers, and help improve our economy,” LeMieux said in a statement. “Small business is the backbone of our economy, creating two out of every three jobs in our country. They need tax relief; they need access to capital. This bill will help achieve those goals and will not raise taxes or add to the national debt.”

This XBRL Thing Appears to Be Really Happening

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

There’s no time to take a breather when it comes to XBRL implementations. New projects, regulations and initiatives are launched or introduced somewhere around the globe just about weekly, it appears. CFOs with firms that have yet to join the group won’t be out of the loop much longer.

XBRL, the acronym for eXtensible Business Reporting Language, means that the data contained within financial reports is constructed as individual elements, rather than blocks of text. Each piece of data comes wit and is linked to accounting definitions or rules. So, a number that makes up annual revenue has a different identity than a number that goes into payroll expense. The result? The data becomes “computer readable,” or interactive, so analysts, investors and regulators can easily compare one set of financial data to another.

Consider the following announcements and events:


Public company filings in the US: The last group of public companies that have yet to file XBRL financial statements with the SEC will start doing so for fiscal periods ending on or after June 15 of next year. These generally will be companies with market caps of less than $75 million or annual revenue of less than $50 million.

Domestic Banks: Earlier this month, Citibank announced that it was participating in a pilot involving the use of XBRL within dividend announcements issued by American Depositary Receipts, or ADRs. ADR dividend announcements were a logical starting point, because they’re concentrated among a relatively small number of issuers, and currently require lots of paper and re-keying of information, as this article in Earth Times points out.

US Legislation: True, a provision contained in early versions of the Dodd-Frank bill, and which would have required federal regulators to use a standard electronic format, like XBRL, when collecting info from the financial sector never made it to the final version. However, this summer Rep. Darrell Issa of California introduced a bill (H.R. 6038) that would amend Dodd-Frank to again include this provision. On July 30, it was referred to both the Committee on Financial Services and the Committee on Agriculture.

Along those lines, the House and Senate currently are hammering out legislation, the 2009 Federal Financial Assistance Management Improvement Act (S.303), which would require federal agencies to post spending data online in a uniform fashion – most likely, XBRL, NextGov reports. Just as XBRL will allow for easier analysis of corporate finances, this move would enable taxpayers and regulators to more easily examine federal spending and contracts.

Credit Agencies: Just before Labor Day, the SEC announced that a list of XBRL tags had been published on its website, and that nationally recognized statistical rating organizations (NRSROs) would need to begin using them by November 1 of this year.
Mutual Funds: By January of next year, mutual funds will be required to provide the SEC with summary information on risk and return from their prospectuses in XBRL format.

While XBRL’s benefits for investors have been the focus of much attention, the XBRL-related initiatives underway should benefit corporate America, as well, judging from a study by two researchers at Fordham University. In “XBRL and its financial reporting benefits: Capital market evidence,” Christine Tan and John Shon of Fordham write, “the findings of this study suggest that firms that file using XBRL experience a reduction in information asymmetry.” Moreover, XBRL may help smaller firms attract an analyst following, they add.

Are Boomers Embracing the Always-Connected Attitude of Gen Y?

The following post is republished from AccountingWEB, a source of accounting news, information, tips, tools, resources and insight–everything you need to help you prosper and enjoy the accounting profession.

The technology use gap among the generations is closing rapidly. There may be no better example that hits home than Michael Winerup’s “Generation B” column in The New York Times, “On Vacation and Looking for Wi-Fi.” We all are touched, most of us are trapped by the psychological effect of being accessible 24/7 and the desire to keep on top of the deluge of messages and data coming in unstoppable torrents.

Winerup points out that just a few years ago the middle-aged members of his three-generation, geographically extended family vacationing together left their work and tech gadgets at home. Three years ago, a few made a visit to an Internet café on their vacation, just for the novelty of it. This year some of them stood in a long line in a resort lobby to pay for 25 hours of Internet service, brought laptops, and checked e-mail daily. This way they reduce the e-mail build-up awaiting them the first day back at work. I surely relate to that post-vacation return anxiety even as I resist checking e-mail every day when out of the U.S.


“We expect ourselves to be available,” said Winerup. That’s the Boomers’ mindset. Technology is making us work harder. Gen X and Y have been continuously connected for years, but many of them don’t want to be always available for work.

Winerup says we all are expected to use all the Internet tools for research and client relations. No more depending on secretaries and assistants.

The hit film “Up in the Air” made the point that critical human interactions, like layoffs, still require in-person contact. All the electronic connectedness not only can be a poor substitute for in-person higher touch contact, but it also leaves little time for the high touch. Now the connectedness has even invaded vacation time away with family and friends.

Is it positive or negative that the generations have something else in common?…I guess it depends.

Please share your thoughts.

Phyllis Weiss Haserot is the president of Practice Development Counsel, a business development and organizational effectiveness consulting and coaching firm she founded over 20 years ago, A special focus is on the profitability of improving inter-generational relations and transitioning planning for baby boomer senior partners (www.nextgeneration-nextdestination.com). Phyllis is the author of “The Rainmaking Machine” and “The Marketer’s Handbook of Tips & Checklists” (both West 2009). pwhaserot@pdcounsel.com. URL: www.pdcounsel.com.

IRS’s Employment Tax National Research Project Just Getting Started

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

About 2,000 firms around the US have received audit letters from the IRS as part of the agency’s Employment Tax National Research Project (NRP). If your firm isn’t one of them, you can’t breathe easy just yet – the agency has indicated that it include a total of 6,000 firms over three years. What’s more, the “examinations will be comprehensive in scope,” and “employers should have all of their records available to expedite these examinations,” the IRS saidhe project last November.

While similar to an audit, an NRP is designed to “take a snapshot of a given taxpayer population in order to determine the compliance (with tax regulations) within that population,” according to this article by Kevin Packman of Holland & Knight. In addition, the companies studied are chosen at random.

The NRP is the first the IRS has undertaken in 25 years. During that time, the agency noted, business practices regarding employment taxes may have changed significantly, prompting the need for study. In particular, the IRS is looking for data that will allow for a better understanding of just how well corporate tax filers comply with regulations. That way, they can focus their efforts on areas of greatest non-compliance.


Equally important, the agency is looking to boost its knowledge of the “employment tax gap.” The tax gap is the difference between the amounts that taxpayers should pay, and the amounts they actually pay on a timely basis. A gap can come about in several ways: non-filing or failure to file a return; underreporting income or overstating deductions; and underpaying the amounts actually owed.

In 2006, the IRS estimated a gap of $290 billion for the year 2001. The bulk of the gap — 80 percent — was due to under-reporting income, the IRS said.

In an effort to close the gap, the National Research Project will focus on several subject areas, noted the law firm of Morgan Lewis:

Worker Classification: The question of whether a worker is an employee or an independent contractor keeps rearing its head. From the IRS’ point of view, that’s probably because they see a fair amount of misclassification of employees at contractors – which means lost tax revenue. An August 2009 GAO report on the topic referred to a DOL study in 2000 which found that between 10 and 30 percent of firms audited in nine states misclassified at least a portion of their employees. In 1984, the IRS estimated that the misclassification of employees meant a revenue loss of $1.6 billion.

Executive compensation: This includes non-salary compensation, like loans, travel, deferred comp, stock-based compensation and more.

Fringe benefits: The fun stuff some execs get, like the use of company aircraft or cars, club dues, and housing, among other perks, will be under the microscope. The audits may even include benefits like gift cards, employer cafeterias and athletic facilities, Morgan Lewis notes.

Payroll taxes: The agents will examine Forms 941, Employer’s Quarterly Federal Tax Return. As part of this, they will look at backup withholding, next-day deposit requirements and Form 1099/W-2 compliance, among other issues.

What can a firm do to prepare in case it receives notice that it will be part of the NRP? As a starting point, management should conduct an internal compliance review. That way, they’ll have a better idea of potential weak points, and to take steps to resolve issues that could prove to be sticking points during an audit, Packman says.

In addition, all CFOs need to recognize that this project “is the beginning of a long-term emphasis by the IRS on employment tax issues,” Packman writes. Once the NRP is wrapped up, the IRS will use the data it has gathered to focus on areas that were shown to have higher rates of noncompliance.

FRC Raps Big 4; Pressure to Perform Non-Audit Work Remains High

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

The Financial Reporting Council of the UK has released the annual results of its inspection of the Big 4 accounting firms. Its verdict? They can do better.

Each of the Big Four – KPMG, PwC, Deloitte and Ernst & Young – were found to have been less than perfect. Each firm had its own specific offenses, but the common thread running through the report was that auditors faced too much internal pressure to do non-audit work, so that the quality and independence of the audits were in danger of slipping.


Ernst & Young was rapped for linking its auditors’ pay and promotion to their non-audit work. Deloitte and PwC were both castigated for sending employees to advise companies both firms were auditing.

The inspector said that audit firms should take more “sufficient professional skepticism in relation to key audit judgments.” In other words, the firms should not take the CFO’s word at face value. In particular, this skepticism should be applied to forecasts, impairment tests, revenue and the confirmation of claimed assets.

The regulators are in a difficult position. There has never been more demand for the services of the Big 4. This week, Deloitte CEO Jim Quigley said that his firm was planning on hiring 80,000 new staff globally over the next five years, taking its total roster to 250,000.

Despite being blamed for going easy on companies and banks before the crisis, companies and regulators have no option but to rely totally on their services.

This stranglehold on business looks set to continue, with more work coming from the non-auditing side. Deloitte also released results this week that showed auditing revenues had slid 1% this year over last year. But its work in the public sector had grown by 38 percent.

CFOs Want Tech Investments to Pay Off…Stat!

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

CFOs and CIOs have very different priorities when it comes to IT spending, and that dichotomy is not likely to change any time soon, even as IT budgets are starting to once again increase.

After being slashed to almost nil during the height of the crisis for many corporations across sector and size, IT budgets are beginning to rise.

But CFOs are keeping a keen eye on where that money is going and still expect a relatively swift return on investment (ROI) in order to consider anything beyond maintenance and upgrades.


They want to clearly see that ROI—whether it be through qualitative measures, like better compliance or improved risk management, or through quantitative measures like reductions in days sales outstanding (DSO) or decreased cost-per-check.

As Craig Himmelberger at SAP said in a recent interview I did for Global Finance magazine: “People don’t want to rip and replace systems that are still functioning well, so a lot of the investments we see now are incremental.”

This IT budget allocation is likely to continue for the near future, at any rate, regardless of what CIOs may want. However, there does have to be a balance. At some point when liquidity risk fears begin to subside, CFOs will once again be more open to their CIOs’ suggestions for IT spending.

And what CIOs want to see is more spend on innovation, as Ellen Pearlman noted in her blog on CIOZone.com last month.

She quoted CXO Art Sedighi as saying: “In the current time and environment, the biggest challenge is [to] convince upper management to open up their wallets again after almost 3 years. The IT staff has been pulling things together with nothing short of band-aids since 2008, and things are about [to] fall apart. All management sees is the fact that spending was down, and they survived.”

Pearlman points out that while most execs believe that IT innovation is important, companies have consistently slashed spend on innovation over the past decade. In an AT Kearney study, executives cited IT innovation spend of 30 percent in 1999, compared with just 14 percent by 2009.

In the study, 45 percent of IT budget went to improving operations and 41 percent went to business enablement/process improvement. Most respondents felt that 24 percent of the IT budget should be directed towards innovation.

The current budget split certainly meshes with the continued corporate focus on driving down costs across the working capital chain. Indeed, it may be quite some time before CIOs get their dream IT allocation.

No One Is Giving Up Spreadsheets, So The IIA Figured It Better Put Some Audit Guidance Out There

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

Many finance departments would grind to a halt if forced to do without spreadsheets. They’re quick, easy and inexpensive tools for manipulating and analyzing data that just about anyone can master.

However, these attributes also mean that spreadsheets create a tremendous risk, particularly if their results are incorporated into the company’s financial reports or used to support a business’ operations.

With this in mind, the Institute of Internal Auditors (IIA) in June issued GTAG (global technology audit guide) 14, a guide for auditing what it calls “user-developed applications,” or UDAs. While spreadsheets are the most visible type of UDA, the term also can include applications like user-developed databases and reports. UDAs are “…created and used by end users to extract, sort, calculate, and compile organizational data to analyze trends, make business decisions or summarize operational and financial data,” the IIA states.


By their nature, UDAs present three types of risk. One is data integrity – the old “garbage in, garbage out.” User developed applications don’t follow a structured application development cycle, and lack any sort of change management or version controls – that is, any number of individuals may be able to update a spreadsheet. All this increases the risk of inaccurate data making its way into the application.

Next is the risk that confidential data is compromised. Many UDAs can easily be attached to an email and sent to someone who shouldn’t have access to the data.

Finally, there’s what the IIA calls “availability risk.” Because many UDAs reside on flash drives and individual PCs, they’re easy to overlook when the company is backing up data. Or, the information can easily be lost altogether.

Internal auditors can take several steps in their audits to reduce the risks any UDAs in use pose to their firms. A starting point is identifying key UDAs. These typically are those that are part of the financial or management reporting processes, or use to comply with regulations. One-off spreadsheets used on an ad-hoc basis probably aren’t key.

The auditors also need to assess the risks posed by the key UDAs. To understand this, they’ll need to know who uses the applications, and how. From this, they can estimate the financial, operational and regulatory risks the UDAs present. The more complex the applications are, the more embedded they are in organizational processes, and the greater their complexity, the more risk they present.

Next up is examining the controls in place around the UDAs to determine if they reduce the risks to an acceptable level for the organization.

Spreadsheets and other user-developed applications play a valuable role in many organizations. At the same time, they can expose companies to a great deal of risk. Appropriate management and control is critical to mitigating the risks they present.