Advice and information to
PUBLISHED BY   Pannell Kerr Forster of Texas, P.C.         help you manage your business

       GO BEHIND

       VOLUME 4   ■   ISSUE 3   ■   20 04

      Fair Labor
      Standards Act
      Life’s major events
      and their financial
           The Leading Edge

           Dear Friends and Colleagues:                                                              Menu of Services
           Welcome to the spring 2004 edition of The Leading Edge, your source for news and          Audit and Accounting
           information affecting today’s business marketplace.                                       • Audits, reviews and compilations
                                                                                                     • Transaction services
                                                                                                     • Evaluation and implementation of internal
           Our cover story for this issue focuses on one of today’s most discussed and debated         control systems
           topics—computer fraud. It seems that you can’t turn on the television or open a           • Employee benefit plan audits
           newspaper without being bombarded by the latest reports of fraud and the many             • Systems consulting
                                                                                                     • Mergers and acquisitions
           issues associated with it, including the electronic component so prevalent in our daily   • Special agreed-upon procedures
           lives. While debate continues within the federal government on how to address and         • Operational Audits
           combat this issue, one fact remains certain: we should remain continuously aware of       • Forensic Accounting / Fraud Investigations
           the immense consequences of fraud in business as well as in our personal lives.           Business Process Consulting
           With this issue, we present two complementary articles on detection and prevention
                                                                                                     • eCommerce strategy consulting and implementation
           of fraud. Gregory Price, a shareholder and director for the firm, discusses the warn-     • Operational process improvement
           ing signs to watch and how to avoid situations where fraud may occur – no easy feat       • Entrepreneurial planning and business
           for many of us, but just another day at the office for forensic accountants in              plan development
                                                                                                     • Business process measurement
           “Forensic accountants: the CSIs of the business world.” Next, Jennifer LeBlanc, an
                                                                                                     • Valuation services
           audit senior manager with our firm, takes a very practical approach in her article
           “What’s all the buzz about fraud?” and examines current regulations (some conflict-       Entrepreneurial Solutions
           ing!) and how they impact our audits of financial statements.                             •     Healthy Start Package for business start-ups
                                                                                                     •     Outsourced controller & CFO
                                                                                                     •     Cash flow management
           Changing gears a bit, one of the newest estate planning tools available to us is          •     Payroll processing
           long-term care insurance, but how many of us really know whether this is something        •     Accounting software support
           that makes sense for us personally? We’ve all heard the phrase “insurance poor,” so       •     PKF virtual advisor
           is long-term care insurance just another added component to an already overcrowd-         Information Technology Consulting
           ed family of policies? It all depends on your personal situation, of course, and the
                                                                                                     •     Application software selection assistance
           level of risk you’re willing to take. Through “Do you need a long-term care insurance     •     Business system design and implementation
           policy?” two members of our Tax Department, Brad Whatley, shareholder/director,           •     Hardware selection and implementation
           and Alison Muecke, manager, examine the pros and cons of managing future risk             •     Network infrastructure evaluation and
           using these types of policies. I think you will walk away much more informed and
           educated about this planning opportunity for the well-being of you and your family.       Litigation and Insolvency
                                                                                                     •     Bankruptcy and insolvency consulting
           In other firm news, PKF Texas is immensely proud of its staff who continue to excel       •     Insurance claims
           and exceed expectations, not only in the office, but in our community as well. That’s     •     Intellectual property disputes
                                                                                                     •     Divorce proceedings
           why we are very pleased to report that our team who participated in the American          •     Lost profits
           Heart Association’s Heart Walk raised more than $8,700 to support the association’s       •     Accounting malpractice
           educational programs. Find out more about this effort, and what else is going on at       •     Tax controversies
           our firm, in “PKF Texas At a Glance.”                                                     Tax
                                                                                                     • Federal, state and local planning and compliance
           As the school year draws to a close and summer nears, I wish you and yours the best       • Outsourced corporate tax services
           for the upcoming vacation season.                                                         • Research and development tax planning
                                                                                                     • Cost analysis and accounting for buildings and
                                                                                                       manufacturing facilities
                                                                                                     • Tax controversy management and resolution
                                                                                                     • Estate, gift and tax trust planning
                                                                                                     • Business succession planning

                                                                                                     International Tax
           Warren W. Cole
                                                                                                     • Global tax minimization planning and
           President                                                                                   implementation
                                                                                                     • Tax advantages for exporters
                                                                                                     • Transfer pricing studies and planning
                                                                                                     • Withholding tax compliance and planning for
           pannell                                                                                     cross-border payments
              kerr                                                                                   • Income and estate planning and compliance for
                                                                                                       resident and non-resident aliens
           forster                                                                                   • US expatriate individual income taxation
            of Texas, p.c.


 2                                                                                                                                VOLUME 4    ■   ISSUE 3   ■   2004

      VOLUME 4        ■   ISSUE 3     ■   200 4

            The Leading Edge                              c o nte nt s
The Leading Edge Alliance is an international
organization of large, independently owned
accounting and consulting firms. Our members
are top-quality firms from around the country             features
with deep client relationships and strong ties
to the community.
Alliance firms provide their clients with an              7    COVER: Computer forensics
unbeatable combination: the comprehensive
size and scope of a large national company,
                                                               Go behind the screen to investigate tech DNA
along with the continuity, consistency and
quality service of a local firm.
With 40 member firms ranging in size from
                                                          13   Fair Labor Standards Act
$7 million in revenue to more than $40 mil-                    Are you in compliance?
lion, the combined revenues of Leading Edge
Alliance firms total more than $650 million
with more than 4,000 staff. Twelve of the
firms are in “The 2003 Accounting Today Top               16   Life’s major events and their financial implications
100 Firms,” with 10 more just below the rev-
enue required for entry into the Top 100.                      Your personal milestones can affect your bottom line
Many of the participating managing partners
have established themselves as leaders in
the public accounting profession; others are
emerging as the trendsetters and trailblazers
for the future of public accounting.
   Leading Edge Advisory Committee
                   Linda Watson
                    Brady Ware
                  Kerry Pascetta
                    CCR Group
                Georgina Giannelli
               KGN Financial Group
                   Leisa Gill
      Lattimore Black Morgan & Cain, P.C.
               Marshall Lehman
        Lurie Besikof Lapidus & Co. LLP                   4    Forming strategic alliances can improve business
                 Raissa Evans
       Pannell Kerr Forster of Texas, P.C.
                 Elizabeth Reed                           5    Detect and prevent computer intruders
           Postlethwaite & Netterville
                Karen Kehl-Rose
            The Leading Edge Alliance                     6    Payroll: Are you ready to outsource?
                in affiliation with
          Custom Publishing Group (CPG)
         Ann M. Gynn and Wendy A. Hoke                    9    News and information from our firm
                 Amanda Horvath
                    Art Director
                                                          18   Client Edge: The Nasher Sculpture Center
          Stacy Vickroy, Trishia Karsnak
                 Graphic Designers                             From zero to big business in 60 days
         Custom Publishing Group (CPG)
            Editorial & Design Services

                                                          19   The Leading Edge Alliance Members

The Leading Edge is published quarterly by Custom
Publishing Group, 812 Huron Road, Suite 201, Cleveland,
Ohio, 44115, (216) 523-1212, FAX (216) 241-5458.
Periodicals postage paid at Cleveland, Ohio.                                  Winner 2003 AGD award for publication design

        THE LEADING EDGE                                                                                                     3

              Forming strategic alliances can improve business

                  trategic alliances are gaining popu-   among these organizations. “I had a
              S   larity as more businesses try to
              maximize their attraction in new mar-
                                                         conversation with some colleagues
                                                         with the same concern. The Leading
                                                                                                     “MOST OF THE TIME,
              kets and improve services while mini-      Edge Alliance grew out of dissatisfac-      WHAT MAKES A
              mizing financial risk.                     tion of the disparities seen by the three   STRATEGIC ALLIANCE
                 Gary Shamis, managing partner at        founding accounting firms—SS&G,
              Leading Edge accounting firm SS&G          EKH&S in Denver and Kostin Rufkess          UNIQUE IS THAT
              Financial Services in Cleveland and        & Co. in Connecticut,” he says.
                                                                                                     THERE IS SOME
              one of the founders of Leading Edge           Those three firms talked to others of
              Alliance, says the purpose of these        a similar size, client base and philoso-    FINANCIAL REWARD.”
              formalized agreements between com-         phy. Ultimately, 18 firms joined four
              panies or organizations is to combine      years ago to create Leading Edge            — GARY SHAMIS, SS&G FINANCIAL SERVICES

              certain resources and create win-win       Alliance. Today the organization has 40
              business scenarios.                        member firms across the country.
                        “Most of the time, what makes       “We have broadened our service base         The firms are similar in size, type of
                       a strategic alliance unique is    and can now offer more to our clients,”     clientele and philosophy and share
                     that there is some financial        says Shamis, including providing the        similar service issues.
              reward,” he says. For example, during      quarterly Leading Edge magazine.               The Leading Edge has broadened
              the 1980s, a lot of accounting organi-        There are some precautions neces-        services to expand its presence through
              zations were merging to remain a           sary to ensure your alliance will suc-      Kreston International, a global net-
              viable alternative to the then-Big Eight   ceed. “With the Leading Edge, we            work of experienced independent
              accounting firms. “Most firms, in order    have geographic exclusivity, so we          accounting and business advisory
              to compete on a local basis, needed        don’t directly compete against other        firms, and formed alliances with pay-
              some national and international            member firms in our market.”                roll companies, and investment bank-
              resources and exposure. They joined            Criteria for membership requires        ing and technology groups. “These are
              together because of the locations of       that the firm be a market leader            all alliances that enhance our capabili-
              where they conducted business.”            (among the top three) with a largely        ties and expand the services we can
                 Over time, huge disparities grew        privately held client base.                 deliver to our clients,” says Shamis. e


                   Make sure                Make sure the             Get your agree-          Partner with                When problems
              1    there’s a
                                       4    cultures of the
                                                                5     ment in writing.
                                                                                           7   organizations
                                                                                                                       9   crop up, and
              financial incentive.    two organizations         A strategic alliance      that serve the same         they will, sit down
                                      are similar and share     is as serious as a        types of clients.           immediately to solve
                  Make certain        common service            business partner-                                     them.
              2   the trust level     philosophies and          ship, so it demands             Have a
              between your            core values.              a contract.
                                                                                           8    champion of                 Be willing to
              businesses is high.                                                         the alliance in each
                                                                                                                      10    say no to the
                                                                     Find a company       company to keep the         deal if you have
                   Team up
              3 companywith a
                                                                     that can handle
                                                                the extra business
                                                                                          alliance visible and
                                                                                          to help celebrate the
                                                                                                                      questions about
                                                                                                                      future success. e
              already successful.                               and grow with you.        successes.

      4                                                                                                                VOLUME 4   ■   ISSUE 3   ■   2004

Detect and prevent computer intruders
By Jeffrey S. Locketz, CPA, CNA and Yan L. Kravchenko, CISSP, MCSE

   usiness information systems are so           The firewall should function only as
B  integrated in our offices that:           the first line of defense against attacks
                                             from the Internet. Think of it as a lock
• e-mail is as essential as the telephone;
• the Internet is a critical information     on a door, protecting the organization’s
  resource; and                              private network from the public net-
                                             work (the Internet). Just as you may tug
• the organization’s Web site allows us
                                             on the door handle and turn the knob
  to gain international exposure and
                                             to ensure the door is locked, you
                                             should periodically test the firewall.
How secure is this critical
                                             Testing the firewall
                                             Testing the firewall is accomplished using   within computer systems and networks
According to the CERT® Coordination
Center (The Center of Internet Security
                                             a procedure known as penetration testing     and analyzes this information for symp-        HACKERS RANDOMLY
                                             (self-hacking), an attempt to break into     toms of security problems. IDS tech-
Expertise), the number of computer                                                                                                       SELECT THOUSANDS OF
                                             the organization’s private network.          nologies allow organizations to protect
security violation incidents is growing
                                                Penetration testing can reveal prob-      themselves from losses associated with
at an alarming rate. In 2003 alone,                                                                                                      INTERNET ADDRESSES,
                                             lems with misconfigured and vulnera-         network security problems.
CERT/CC recorded more than 137,500
incidents. That’s a 68 percent increase
                                             ble areas, such as:                             There are two varieties of IDSs:            SEARCHING FOR
                                             • firewalls,                                 • Network-based IDS (NIDS) is
from 2002 and 162 percent increase                                                                                                       WEAK SYSTEMS
from 2001. What makes these statistics       • servers,                                      designed to support multiple hosts
even more staggering is that most inci-      • routers and                                   and uses probes located on local
dents still go unreported and some-          • other devices visible from the public         area network (LAN) segments that            6. Install and configure
times even undetected.                          network.                                     report to a monitoring workstation.            an IDS to monitor all
   The consequences of each incident                                                      • Host-based IDS (HIDS) is software               traffic outside the
may have any number of effects on an           Additionally, penetration testing is          installed on a host device (i.e., server,      firewall. The IDS logs should
organization, including:                     useful in understanding the information         firewall, router, etc.) set up to detect       be reviewed on a regular basis.
• loss of time and productivity related      available to hackers, thus avoiding             illegal actions within that host.              If an attack is detected, network
   to system recovery and restoring          becoming an easy target.                                                                       administration should be notified
   normal operation;                                                                      The solid defense                                 so they can take corrective action.
                                             If your organization got hacked,             To harden an organization’s defenses           7. Replace the firewall if the vendor
• loss of revenue;
                                             how would you know?                          against Internet threats, the organiza-           no longer supports it.
• loss of business goodwill through          New ways of hacking are developed            tion should:
   bad public and business relations;        every day; therefore the organization        1. Install a firewall to protect its           Protect your system
• loss of ability to effectively compete     must assume any firewall can and will           private network from the Internet.          Your network is a vital part of your
   in the market place; and                  be broken. For this reason, the informa-
                                                                                          2. Maintain the firewall with the latest       business, and information stored in
• exposure to legal liability.               tion security industry does not consider                                                    computers must be protected. If you
                                                                                             software and patches.
                                             any single technology foolproof against                                                     don’t protect the network, which holds
   In 2003, CERT/CC reported more than       hackers. Without appropriate detection       3. Configure the firewall to reject
                                                                                             all incoming traffic not deemed             such confidential information, you may
3,700 new system vulnerabilities. Hacker     technologies in place, most security                                                        be accused of negligence. Adequate
communities are growing, even high           incidents would go undetected.                  necessary for business operations.
                                                                                             This means closing access to all            protection and follow through is the
school and college students without any                                                                                                  best defense. e
advance knowledge of technology have         Intrusion Detection System (IDS)                unnecessary Internet services.
the ability to break into systems. Hackers   IDS technology is capable of detecting       4. Perform penetration testing on the
                                                                                                                                         Jeffrey S. Locketz is a partner with Lurie Besikof
randomly select thousands of Internet        activity that may lead to a security            firewall at least four times a year to      Lapidus & Company LLP. Yan Kravchenko is a
addresses, searching for weak systems.       breach, including an attempt to bypass          disclose any new vulnerabilities.           manager with LBL Technology Partners.
                                             the firewall. IDS systems help organiza-     5. Review the results of the
The frequent misconception                   tions prepare for and deal with attacks         penetration tests, mitigate any of
The belief that an organization’s firewall   by detecting an illegal entrance into a         the vulnerabilities found and
is its only and best defense against         computer system. It collects informa-           re-scan the firewall once necessary
hackers is certainly a misconception.        tion from a variety of vantage points           changes have been made.

THE LEADING EDGE                                                                                                                                                                        5
  ★                                                                                                                                           ★
                                                                                  ★                                                                   ★
                                                               ★                                                                              ★
      Payroll: Are you ready to outsource?                                                                                                                                     ★
      By Robyne Germany, CPA

           ne of the most frustrating aspects of   4. Do you have employees working in                                                        companies will deposit and pay taxes
      O    running a business is dealing with
      payroll. Most small- to medium-size
                                                      multiple states?
                                                   5. Have you made multiple errors in
                                                                                                                                              on a company’s behalf as part of its ser-
                                                                                                                                              vice agreement, if it fails to remit and
      business owners will agree: everything          calculating your payroll that have                                                      file tax reports timely and accurately,
      about payroll is a nuisance. Not only do        been questioned by your employees?                                                      the employer will be assessed. The IRS
      owners have to be mindful of changes         6. Do you spend more time calculating                                                      recommends the employer inquire
      in personnel; deadlines; and federal,           payroll and addressing various pay-                                                     whether the payroll service company
      state and local tax requirements, but           roll issues than you spend concen-                                                      has a fiduciary bond to protect the
      calculating payroll itself can be time          trating on your core business?                                                          employer in the event of default.
      consuming and tedious.                          A “yes” answer to at least two of                                                           It’s important to establish a relation-
          Other headaches also exist, from         these questions may tell you the time is                                                   ship with a payroll service company that
      issuing payroll checks and ensuring tax      right to consider outsourcing payroll. A                                                   can grow as the business continues to
      filings are made, to remaining 100 per-      professional payroll service can be an                                                     expand. Business owners should obtain
      cent error-free. Employees are much          attractive alternative to an in-house                                                      references for payroll providers from
      more forgiving when errors occur in          function. Not only does a service take                                                     trusted associates, such as accountants,
      their paychecks or W-2s. However, con-       the hassle out of calculating payroll and                                                  attorneys and customers. Business own-
      tinuous mistakes may cause an employ-        issuing checks, but a service can remit                                                    ers should then research each payroll
                                                                                                 • REDUCTION IN PAYROLL COSTS.
      ee to lose faith. The Internal Revenue       payments to various taxing authorities,                                                    service provider as to:
                                                                                                   Outsourcing to a payroll service
      Service, on the other hand, is not near-     and prepares and files annual federal                                                      • COMMUNICATION OF PAYROLL
                                                                                                   company can reduce the direct costs
      ly as forgiving. The IRS estimates that      and state tax forms, including 941s and                                                        INFORMATION – There should be a
                                                                                                   of processing payroll. Many payroll
      one out of every three employers is          W-2s. A professional service also tracks                                                       choice in transmission via PC, fax,
                                                                                                   services charge an average of $3 per
      charged for a payroll mistake. If a com-     various benefits such as vacation and                                                          Internet or modem.
                                                                                                   paycheck. For companies with
      pany is not careful, the penalties can       sick pay, 401(k) benefits and employee                                                     • AVAILABILITY OF PAYROLL INFORMATION –
                                                                                                   fewer than 100 employees, the cost
      severely affect not only its bottom line,    advances.                                                                                      24/7 access is very important, with
                                                                                                   can be much less than a full-time
      but its reputation as well.                     In the past, many companies shied                                                           the provider offering clear instruc-
                                                                                                   payroll clerk.
          As companies continue to grow,           away from using a service due to the                                                           tions on available reports, proce-
      many business owners want to know if         amount of control the company would           • CREATION OF MORE FREE TIME.
                                                                                                   Outsourcing payroll not only allows            dures for correcting mistakes and
      it’s time to consult a payroll expert or     have to give up. Today, many service                                                           customer service inquiries.
      service. The take-charge, entrepreneur-      companies offer a business owner access         business owners to concentrate on
                                                                                                   growing their core business, but it        • COSTS OF SERVICE – All the costs for
      ial spirit that many owners possess          to his or her payroll records 24 hours a
                                                                                                   frees up administrative staff to               processing payroll from the initial
      often prevents them from recognizing         day through the Internet, allowing the
                                                                                                   pursue more value-added activities.            setup to the filing of annual W-2s
      when it’s time to leverage certain           correction of mistakes that were made
                                                                                                                                                  should be reviewed.
      administrative tasks to other employ-        during the transmission of data or in the     • FEWER TECHNOLOGY HEADACHES.
      ees, either inside or outside the organi-    calculation itself. While many owners           Business owners no longer have
                                                                                                   to worry about whether the most               The decision to outsource payroll to
      zation. For this reason, it’s important to   embrace this level of accessibility, others
                                                                                                   recent version of payroll tax tables       a third party is not an easy one. It takes
      assess their payroll situation by asking     place all confidence in the payroll service
                                                                                                   is updated or if the company’s             a great deal of research to find the right
      these six questions.                         company to perform its expected duties.
                                                                                                   accounting software can handle             company for your business. But once
      1. Was your company assessed a pay-          A business owner can choose his or her
                                                                                                   current payroll needs.                     the decision is made to turn payroll
          roll tax penalty related either to a     level of involvement in the process.
                                                                                                                                              processing over to the experts, business
          failure to remit taxes on time or for       According to SurePayroll, a national
                                                                                                    Before deciding whether outsourcing       owners can get back to doing what they
          paying an incorrect amount?              payroll service company focused on
                                                                                                 payroll is the right choice for your busi-   do best—growing their business. e
      2. Do you find it difficult to remember      small businesses, some other benefits to
          when to remit unemployment taxes         using a payroll service company include:      ness, there are some factors to consider.
                                                                                                                                              Robyne Germany is an audit senior manager at
          to the various federal, state or local   • ACCURATE PAYROLL TAX LIABILITY              First, the IRS wants business owners to      PKF Texas.
          taxing agencies?                           CALCULATIONS. Most payroll service          know that the employer is ultimately
      3. Does your payroll consist of full-           companies provide a tax guarantee,         responsible for the deposit and pay-
          and part-time, hourly and salaried          ensuring that there will be no penal-      ment of federal taxes, as well as the
          employees who are all paid at vary-         ties and taking responsibility for         timely filing of quarterly and annual
          ing times during the month?                 penalties if they do occur.                reports. While many payroll service

      6                                                                                                                                                       VOLUME 4   ■   ISSUE 3   ■   2004

                   FORENS CS
                                                        id you know that approxi-
                       THE SCIENCE OF
                                                 D      mately 70 percent of all doc-
                                                   uments never appears on paper?
                                                         that 93 percent
                           WHAT’S SEEN And communication of all corpo-
                                                   rate                  is conduct-
                      AND UNSEEN ON ed electronically?
                                                      There is wealth of data that
                      YOUR COMPUTER only exists a electronically. Cell
                               BY WENDY A. HOKE phones and PDAs store data that
                                                   never get printed. A printed copy
                   of an e-mail is not an e-mail, it’s simply a printout. The actual
                   electronic mail contains metadata — internal information includ-
                   ing dates, times, where it traveled and what networks it touched.
                       Word documents contain metadata that detail how long
                   the document has been open, who created the original, how
                   many times it has been opened and when it was created.
                       The bottom line is that additional information can be derived
                   from electronic data, helping business owners, attorneys and
                   forensics experts retrieve information valuable to them.
                       Electronic discovery is a means to get the information on
                   someone’s computer or to retrieve electronic files for litigation.
                       “We’re at a revolution in the way litigation is practiced in
                   terms of discovery,” according to Damon Hacker, director of
                   SS&G Technology Consulting, an affiliate of Leading Edge
                   accounting firm SS&G Financial Services.
                       “There’s a lot of case law in favor of attorneys retrieving
                   files for discovery in electronic format,” he says.
                        Computer forensics is a specialty of electronic discovery.
                   “It looks at all the ‘stuff’ on a computer that you see—docu-
                   ments and e-mails—and the stuff you don’t see—such as
                   deleted files. We can acquire all of the information that is on
                   a computer, network or system in a forensically sound fash-
                   ion. All of those things—both seen and unseen—may have
                   relevancy to a case,” says Hacker.
                       The term forensics is deliberate. Just as hair, fiber and
                   blood samples are collected from a crime scene to test for
                   DNA and find a suspect, a computer’s DNA can be collected.
                       “When you print a file, the actual image of the printed file
                   gets saved on your computer’s hard drive. The computer has
                   taken a snapshot and stored it. The register keys contain
                   information about what was installed on the computer, what
                   has been removed, any external devices that have been con-
                   nected and any networks you’ve attached to,” he says. All of
                   this information is lumped into one category that computer
                   forensics experts call “artifacts.”

                   continued on next page
THE LEADING EDGE                                                                   7

        continued from previous page                                 rules of discovery. We have a protocol ensuring that                          “WE TAKE A Current case law
                                                                     nothing is divulged to an opposing party until it’s                                             Although computer foren-
        Why you should care
                                                                     gone through review and has been approved as dis-                       SNAPSHOT OF             sics sounds a little like Big
        Computer forensics, which has been around for 30                                                                                               WHAT THE Brother, a number of court
                                                                     covery or stamped as privileged,” he says.
        years, has been used primarily by the federal govern-
        ment, FBI and CIA. Traditionally, it only was used in
                                                                         Business owners need to know about computer                              COMPUTER cases already have dealt
                                                                     forensics because they need to think ahead.                               LOOKED LIKE AT with related issues, includ-
        litigation when the electronic data was thought to
                                                                         “It could be consider as a violation of privacy rights. A
        hold a smoking gun, explains Hacker.                                                                                                          THE TIME.” ing the rights of employ-
                                                                     lot of employees feel they still have a right to privacy and                                    ers, cost sharing, proper
            “It was esoteric, expensive, time-consuming and                                                                                         — DAMON HACKER
                                                                     the courts are leaning that way. But it’s also easy to say in                                   methods and privacy.
        interruptive to an organization. But in the last five
                                                                     a written policy that any computer activity on employer             Among the decisions is the opinion in Gates Rubber
        years, attorneys have woken up to the fact that this
                                                                     computers can be searched,” says Hacker.                         Co. v. Bando Chemical (1996), which states that if you
        makes a lot of sense. There’s a lot of information you
                                                                         Computer forensics can be used in criminal, civil            go about computer forensics in the wrong way, it is
        can glean from computer forensics. More importantly,
                                                                     and administrative cases. Examples include:                      conceivable that evidence will be thrown out. “The
        if you don’t use computer forensics and electronic dis-
                                                                     • wrongful termination                                           judge was highly critical of the experts because they
        covery, it could be considered malpractice.
                                                                     • network penetration                                            didn’t do it right,” says Hacker.
            “The day that happens, the electronic discovery
                                                                     • sexual harassment                                                 In Simon Property Group (SPG) v. MySimon (April
        industry will explode. In 2004, the industry is expect-
                                                                     • intellectual property disputes                                 2003), the judge ordered that “based on the newly dis-
        ed to generate about $2 billion. Computer forensics
                                                                     • contract breaches/disputes                                     covered evidence—evidence which SPG should have
        represents about a tenth of that industry.”
                                                                     • validated date and time for a particular docu-                 produced before the August 2000 trial—MySimon is
            The field is far more efficient and affordable than it
                                                                         ment’s creation                                              entitled to a new trial on all of the issues and not just on
        used to be. Forensics is often done in the evenings or
                                                                     • tracked e-mail/Internet history                                the issue of corrective advertising damages.” The judge
        off hours, and then followed up with analysis.
                                                                     • illegal activity (used as contraband) such as trad-            also indicated that sanctions against SPG would be
            In the standard course of litigation, attorneys for
                                                                         ing child pornography                                        appropriate in light of its withholding key evidence—
        both the plaintiff and defendant can receive hundreds
                                                                         Business owners can proactively or reactively mon-           documents that revealed that SPG’s senior management
        of boxes of documents. Often, they hire a litigation
                                                                     itor usage but are best served by having a clearly stat-         had made decisions in the summer of 2000 that contra-
        support person to transcribe what is on paper into the
                                                                     ed Internet and fair usage policy.                               dicted the positions it took at the August 2000 trial.
        computer so the information is searchable. “This is
                                                                         “Let employees know that they should not expect                 And most recently, U.S. District Judge Shira A.
        very costly and time-consuming. Forensics is better
                                                                     privacy. They are using your resources and those                 Scheindlin of the Southern District of New York ruled
        tailored to the case. Instead of coming back with 7,000
                                                                     resources are supposed to be used for business pur-              in Zubulake v. UBS Warburg that the plaintiff and the
        documents, you’ll be able to receive the 3,000 elec-
                                                                     poses only,” Hacker says.                                        defendant would have to share the cost of the restora-
        tronic documents relevant to the case,” says Hacker.
                                                                         One way most people try to hide their inappropri-            tion of e-mails from the defendant’s back-up to present
            More and more attorneys who are familiar with and
                                                                     ate activities is by connecting to the company network           evidence of discrimination, but that the bulk of the
        have used this technique have found that it is changing
                                                                     and using the company’s Internet to access their home            expense (75 percent) should be paid by the defendant.
        the way they practice—and they’re not going back to han-
                                                                     computer and download images, visit sites and move                  But what’s even more important is that in her July 24,
        dling discovery and documents the old-fashioned way.
                                                                     contraband.                                                      2003, opinion, Scheindlin stated, “The point is simple:
            “We’re trying to educate business owners and attor-
                                                                         “Your rights as a business owner extend to those             technology may increasingly permit litigants to recon-
        neys about what computer forensics can and cannot
                                                                     home computers, but only if you’ve stated clearly in a           struct lost or inaccessible information, but once restored
        do,” says Hacker. “It can’t get something back that’s
                                                                     policy that there is no expectation toward privacy               to an accessible form, the usual rules of discovery apply.”
        not there. We’re very careful not to circumvent the
                                                                     involving any work done at home or the office.”                     “This has been a huge wakeup call to the legal pro-
                                                                         Hacker recommends that you treat every case, even            fession,” says Hacker.
        MORE RESOURCES                                               if it’s simply administrative, as if it’s going to court. “You
                                                                     need to protect evidence and ensure there’s a chain of           Helpful resources
                         “DESIGNING A DOCUMENT STRATEGY,”            custody and that it’s reproducible. You may discover a           Although computer forensics is a fragmented industry,
                         BY KEVIN CRAINE, MCGREW AND MCDANIEL        situation that was simply going to be a reprimand is             Hacker recommends talking to your accountant or
                         GROUP (2000), describes a five-phase        worse than you thought and you’ll want to sue,” he says.         lawyer because he or she will know who can help.
                         process that guides readers through the         Traditionally, business owners thought computer                 “If you think you’re in this situation, get an expert
                         design of document strategy tailored to     forensics was very expensive and would involve seiz-             and at least image the files. If you decide to shelve the
                         their particular situations.                ing computers for two weeks or two months, which                 case for two years, you still will have the information if
                                                                     could put a company out of business. But that’s not              you need it. If you don’t, you’ll be overwriting the infor-
                         “U.S. NEWS & WORLD REPORT:                  how it works today, Hacker says.                                 mation and possibly spilling the evidence.”
                         OFFICE POLITICS IN THE ELECTRONIC AGE,”
                                                                         “We take a snapshot of what the computer looked                 In the normal course of business, employees shred
                         BY DANA HAWKINS (MARCH 22, 1999)
                                                                     like at the time. We still need to prove that no one             documents in accordance with the company docu-
                         “Old bald-headed goat.” “Idiot.”
                         “Useless control freak pseudo figurehead
                                                                     tampered with the evidence, so we set up a chain of              ment retention policy. A similar retention policy
                         numbskull.” Beth Gunn and Alec Myers        custody. We document every person who touches it                 should be followed with electronic files.
                         never figured that these e-mailed refer-    along the way and all sign off saying this is where the             “Attorneys are being sanctioned for not preserving
                         ences to their boss—casually exchanged      information was and what we did with it.                         their clients’ information. It may not be deliberate, but
                         to relieve boredom—would become part            “We maintain that chain of custody through the end of        just by turning on the computer, you could be
                         of a two-year court battle. This story      the case. We lock up the drive and have ways of authen-          destroying important records and evidence,” he says.
                         details the battle that ensued. e           ticating that we have an exact copy of the drive and that           Make sure your company is well positioned in case
                                                                     nothing subsequently has happened to it,” he says.               of potential violations. e

        8                                                                                                                                                              VOLUME 4   ■   ISSUE 3   ■   2004
    VOLUME 4   ■   ISSUE 3   ■   2004

                                           Pannell Kerr Forster of Texas, P.C.
                     LEADING                                    Certified Public Accountants & Professional Advisors

                                        Forensic accountants: the CSIs of the business world
                                        By Gregory S. Price, CPA, CFE, CISA

                                            ome things never change … death,
                                        S   taxes and business fraud. Headlines
                                        over the past few years included highly
                                        publicized probes, prosecutions and
                                        frauds of all types, but who can help us                                                                           build their case,
                                        get to the bottom of this chicanery? Your
                                        friendly neighborhood forensic accoun-                                                                             transaction by
                                        tant: the CSIs of the business world.
                                            While fans of the hit series CSI
                                        (a.k.a., Crime Scene Investigators)
                                        know all about this science, there also is
                                        a little known, growing world of inves-
                                        tigators who also perform complex,
                                        painstaking analysis of crimes and look
                                        for clues in their own pursuit of justice.
                                        Known as forensic accountants, many
                                        started out as external or internal audi-
                                        tors, controllers, accountants, and even
                                        police investigators at the local, state or
                                        federal level. Forensic accountants also      opposite. The forensic accountant is               small business causes $127,500 in
                                        are CPAs, certified internal auditors         looking for one transaction that will be           losses. The average scheme in the
                                        (CIAs), certified information systems         the key; the one that is a little different,       largest companies costs $97,000.
                                        auditors (CISAs) and certified fraud          no matter how small the difference, that       •   Corruption schemes account for 13
                                        examiners (CFEs).                             will open the door. Discovery of that              percent of all occupational frauds
                                            At this point, the sleuth in all of us    seemingly immaterial loss is vital.                and cause more than $500,000 in
                                        would want to know what a forensic            Forensic accountants build their case,             losses on average.
                                        accountant does.                              transaction by transaction, and usually        •   Fraudulent statements are the most
                                                                                      begin working when someone in an                   costly form of occupational fraud,
                                        Forensic accounting versus auditing           organization suspects a crime is being             with median losses of $4.25 million
                                        Joseph T. Wells, CPA, CFE, chairman           or has been committed.                             per scheme.
                                        of Austin, Texas-based Association of                                                        •   Frauds committed by employees
                                                                                      Fraud statistics are staggering                    cause median losses of $60,000,
                                        Certified       Fraud        Examiners
                                        (—the regulatory body            Why do we need forensic accountants,               while frauds committed by man-
                                        that governs the CFE designation—             and how big is the problem of corpo-               agers or executives cause median
                                        says forensic accounting “relates to any      rate or business fraud? A recent study             losses of $250,000. When managers
                                        accounting for courtroom purposes,            by the ACFE found:                                 and employees conspire in a fraud
                                        such as valuation, divorce, bankruptcy,       • An estimated 6 percent of revenues               scheme, the median loss rises to
                                        fraud or business disputes.” Industry            were lost in 2002 as a result of occu-          $500,000.
                                        experts also believe accounting and              pational fraud and abuse. Applied to        •   The average fraud scheme lasts 18
                                        legal malpractice, arson investigations          the U.S. Gross Domestic Product,                months before being detected.
                                        and the tracing of assets can be consid-         this translates to losses of approxi-
                                                                                         mately $600 billion or about $4,500         Preventing fraud 101
                                        ered a part forensic accounting.
                                           Many confuse auditing with forensic           per employee.                               With increases in forensic accounting
                                        accounting. The two are very different.       • Small businesses are the most vul-           efforts to combat and prosecute fraud,
                                        Auditing is governed by the concept of           nerable to occupational fraud and           why have we seen such large increases
                                        materiality. Forensic accounting is the          abuse. The average scheme in a              in the number of actual reported cases,
                                                                                                                                                           continued on page 12

THE LEADING EDGE                                                                                                                                                             9

    Do you need a long-term care insurance policy?
    By Brad Whatley, CPA/PFS, CFP, and Alison Muecke

          hen we think of long-term care,           Skilled care and personal care           insurance policy is not for everyone.         introduction of this bill further empha-
    W     the very first thought is an image
    of a nursing home. Times have
                                                 remain the most common terms that
                                                 describe long-term care. Skilled care
                                                                                             Whether you should buy a policy
                                                                                             depends on your age, health status,
                                                                                                                                           sizes the importance of long-term care
                                                                                                                                           as a growing concern in our nation’s
    changed. Long-term care now encom-           refers to medical conditions requiring      overall retirement objectives and             health care crisis.
    passes a wide variety of services, and       the care of a skilled medical profession-   income. As a general rule, if you have
    with recent publicity surrounding many       al, including nurses or therapists          trouble stretching your income to pay         What types of benefits are provided?
    of the new insurance policies, anyone        licensed with the state. Typically, this    for utilities, food or medicine, or if your   Types of benefits and amount of cover-
    who is planning for the future should        daily care is ordered by a physician and    only source of income is Social Security,     age cover a vast array of options. You
    consider the viability and effectiveness     provided in a nursing home, but also        you should not purchase a policy. On          must think about what resources are
    of this estate planning tool.                may be provided in other settings, such     the other hand, if you have significant       available to you, as well as benefits that
       Chronic conditions or disability may      as the patient’s home by using home         assets you wish to protect or do not          are important to your lifestyle. As men-
    require one service or a combination of      health care resources.                      wish to burden your family members to         tioned previously, policies can cover
    long-term care services to help an indi-        Personal or custodial care is a less     pay for part or all of your care, you may     stays in nursing homes, adult day care
    vidual compensate for limitations in his     intensive treatment that helps a person     be a good candidate for a policy.             centers or home health care. Depending
    or her ability to function independently.    perform activities of daily living. These      The most common misconception is           on your needs, you may choose one or
    As such, long-term care is designed to       services may be provided in a variety of    that you are already covered by Medicaid      a combination of all of these benefits. It
    assist a person to maintain a level of       settings, including nursing homes,          or Medicare. More than half of nursing        is crucial to read the actual policy and
    health and well-being. The services          adult day care centers, retirement com-     home bills are paid out-of-pocket by          not just the brochure’s promise of what
    associated with this type of treatment       munities or at home.                        individuals and families, with the bal-       is covered. It also is important to con-
    include help with activities of daily liv-                                               ance being provided by state Medicaid         tact your insurance company before
    ing, such as bathing, dressing and eating    Who should buy long-term care               programs. In addition, only those who         entering the health care facility to deter-
    which, depending on the level of need,       insurance?                                  meet federal poverty guidelines actually      mine if the stay will be covered.
    may involve home health care, adult day      It is difficult to predict who will need    qualify for Medicaid programs.                    Policies will be specific on what is
    care or care in a nursing home.              long-term care, and a long-term care                                                      covered and what is excluded. In gener-
                                                                                             Are there any tax advantages to               al, insurance companies do not pay ben-
                                                                                             purchasing a policy?                          efits for a mental or nervous disorder, a
                                                                                             Yes. The majority of policies available       disease (other than Alzheimer’s), an
                                                                                             today are tax-qualified; a portion or all     alcohol or drug addiction, an illness or
                                                                                             of the benefits paid are not subject to       injury caused by an act of war, attempt-
                                                                                             federal income tax. A portion of the          ed suicide or intentionally self-inflicted
                                                                                             premiums paid for the policy also may         injuries, or if treatment has already been
                                                                                             be deducted as a medical expense. For         paid for by the government.
                                                                                             the 2003 tax year, the deductible
                                                                                             amounts with scalable categories by age       Estate planning is key
                                                                                             include:                                      Now that you are a bit more educated
                                                                                                40 and under . .$250                       on the issues surrounding long-term
                                                                                                41-50 . . . . . . .$470                    care insurance, using this knowledge to
                                                                                                51-60 . . . . . . .$940                    plan for the future should be an integral
                                                                                                61-70 . . . . . . .$2,510                  component to continuous estate plan-
                                                                                                71+ . . . . . . . . .$3,130                ning. Your CPA and financial adviser is
                                                                                                These policy premiums are                  equipped to help you understand the
                                                                                             deductible on Schedule A only to the          advantages and limitations of these
                                                                                             extent that they exceed 7.5 percent of        policies, and help you evaluate your
                                                                                             the taxpayer’s adjusted gross income          own personal situation to reap the most
                                                                                             (AGI). For that reason, many taxpayers        benefits for you and your family. e
                                                                                             will not be able to deduct them. Self-                                 ®
                                                                                             employed individuals may, however,            Brad Whatley, CPA/PFS, CFP ‚ is a shareholder/
                                                                                                                                           director in the Tax Department for PKF Texas,
                                                                                             deduct the full amount as they do for
                                                                                                                                           and can be reached at
                                                                                             their own health insurance premiums.          Alison Muecke is a manager in the Tax Department.
                                                                                             Currently, there is a proposed bill to        Contact her at
                                                                                             make long-term care insurance premi-
                                                                                             ums an above-the-line deduction
                                                                                             (bypassing the AGI requirement). The

    10                                                                                                                                                        VOLUME 4   ■   ISSUE 3   ■   2004
What’s all the buzz about fraud?
By Jennifer LeBlanc, CPA

   n a recent visit to one of my oldest,     Someone is talking about me
I  dearest clients, I sat down with the
longstanding company president to ask
                                             behind my back
                                             Someone is talking about you and it
him a few questions about his control        isn’t just one person. One of the key fea-
environment. When asked to explain           tures of the guidance is the addition of a
how he and his management team set           mandatory meeting by all members of
the tone for honesty and lack of toler-      the audit team prior to beginning the
ance of fraud, he replied (sternly),         engagement. The meeting is held to dis-
“Well, if you handle money in this com-      cuss the potential risks of fraud that may
pany, you have to wear a tie.”               exist at your company, and the team is
    I nodded and accepted this response      charged with evaluating each risk iden-
with a smile that told him I understood      tified. These meetings conclude with an
what he meant about this notion of           action plan to design audit procedures
wearing a tie, as well as how difficult it   that may address some of the key risks
must be to convey what he was really         the team identified.
trying to say. After we left the meeting,
the junior staff person turned to me,        You want to meet with whom?
and, in confusion and disbelief, asked,      One of the most noticeable changes is        yours. It might be difficult for you to       auditors to increase their skepticism
“What was he saying about the tie? I         the requirement that auditors discuss        identify what is happening differently        and carry out additional procedures to
don’t understand.”                           operational controls, and knowledge of       during the financial audit to further         increase our chances of detecting fraud.
    With that same smile of acceptance       fraud and fraud risks, with operations       address this risk. However, you can pre-      The financial audit still will not cover
that bonded me to my client a few            personnel. These are the people who          pare by having a clear written policy         enough new ground to be relied upon
moments earlier, I replied, “Sometimes,      will know if the controls put in place by    about what makes a sale a sale, and           as a forensic audit. In addition, if the
when you ask a difficult question, you       management are actually working. For         then apply those rules consistently.          company has increased concerns or
get a difficult answer.”                     years, auditors have simply relied on        Keeping important factors regarding           suspicions regarding fraud risk, a finan-
    Talk about difficult questions…there     the documentation of controls by man-        revenue recognition rules in mind, in         cial audit will not be adequate. We have
are plenty of them as a result of new        agement or accounting personnel. The         the end, a sale is generally still a sale.    increased our procedures and are work-
auditing standards from the American         new guidance suggests that a short                                                         ing with management to increase our
Institute of CPAs (AICPA) that detail        interview with others handling assets        That is immaterial!                           chances of detection. However, we are
how auditors address fraud detection in      within the company’s operations may          Another major change to auditors’ pro-        talking about a potential person or
their work. The new standard, SAS            reveal deficiencies.                         cedures may require additional time           group of people who are intentionally
No.99, “Consideration of Fraud in a               This line of questioning may be         commitments from your personnel. We           concealing their actions. This can be
Financial Statement Audit”, was the          uncomfortable for your personnel, espe-      are being challenged to add an element        hard to detect.
first major guidance released by the         cially those who were never involved in      of “surprise” to our work. This means            Patience and knowledge will be the
accounting profession after the              answering questions or have not ever         that we can request items that were           best tools in working under this new
Sarbanes-Oxley Act of 2002 was signed        provided information to the financial        posted during the year that don’t direct-     standard. High quality service providers
into law.                                    auditors. However, these interviews are      ly affect year-end balance sheet items.       will continue to invest in training and
    The major features of this new stan-     generally very brief and the auditor         In some cases, we will purposefully           technology solutions to re-engineer our
dard include the addition of a brain-        should attempt to put them at ease. “We      select items below our scope. We really       approaches and mitigate the impact on
storming session about fraud for the         are trying to gain information about         have to change things up, which will          audit costs, while increasing value to
audit team, interviews with non-             how things really work around here so        increase, at least slightly, the ability to   you. Your auditor should be able to
accounting personnel in the company          that we can do a better job. Also, we        detect fraud. In practice, this will          address your concerns and design pro-
regarding fraud, presumption of risk of      have to ask some questions about the         require some patience regarding pro-          cedures that will provide the highest
fraud in revenue recognition and             risk of fraud to all of our clients.”        viding source documents for seemingly         value to your company.
increased scrutiny of all management                                                      small irrelevant items.                          If you have questions or concerns
estimates. The standard’s general tone       A sale is a sale, right?
                                                                                                                                        about the impact of SAS No. 99, we
requires that auditors exercise an           The new standard also requires auditors      So that’s the big deal                        encourage you to contact us at any
increased level of professional skepti-      to increase their presumption of risk        When working with our clients, this           time. e
cism in developing their audit proce-        associated with revenue recognition.         standard can allow us to assist in fur-
dures, and that the new procedures           The auditor is to assume that the incen-     ther identifying risk areas for the com-      Jennifer LeBlanc, CPA, is an audit senior manager for
introduce an element of surprise.            tive or pressure to misstate earnings        pany. The process is designed to be dis-      PKF Texas. Contact her at
                                             exists in every company, including           ruptive, and the AICPA has challenged

THE LEADING EDGE                                                                                                                                                                         11

    continued from page 9

    Forensic accountants: the CSIs of the business world
    as well as the dollar amounts of losses?    tions conducting them.                    the top was discordant at HealthSouth,
    In short, we have not yet reached a            First case in point: In my almost 24   the largest U.S. provider of diagnostic
    baseline in the number of reported          years of performing hundreds of vari-     imaging, outpatient surgery and reha-
    cases because these types of investiga-     ous financial audits and several dozen    bilitation services. Last year, 16 corpo-
    tions are so new to the business mar-       forensic engagements, only one was        rate executives were charged with cor-
    ketplace. The amount of unreported          ever reported in the public domain. As    porate crimes. Fifteen pleaded guilty,
    forensic investigations is staggering.      a result, how do we work to prevent       including all five of the CFOs who ever
    Our current reported activities are only    fraud? According to the ACFE, here are    worked for the company. The CEO was
    a reflection of what we call the “iceberg   five key areas for improvement:           indicted in November 2003, the first
                                                                                                                                       only a matter of time before forensic
    effect” – as organizations work to fix      • Hotlines are still hot.                 chief executive to be charged under the
                                                                                                                                       accountants get their own television
    their problems before they become           • Implement management antifraud          Sarbanes-Oxley Act of 2002’s fraudu-
                                                                                                                                       show. Who knows? First there was
    known to the public, only the tip of the        programs and controls.                lent financial certification violations.
                                                                                                                                       Quincy, then CSI. In this world of real-
    actual cases ever see the light of day.     • Set the tone at the top.                Others who fell included senior vice
                                                                                                                                       ity TV, anything’s possible. e
    Unlike their police counterparts, much      • Develop a code of conduct.              presidents, vice presidents and assistant
    of the forensic accounting work goes        • Establish a confirmation process.       vice presidents.                             Gregory S. Price, CPA, CFE, CISA, is a shareholder
    unreported to the general public and           Second case in point: Based on a          Unless the trend in corporate behav-      and director at PKF Texas. Contact him at
    stays within the walls of the organiza-     combination of occurrences, the tone at   ior and business ethics turns south, it is

                         PKF Texas              Recent awards & recognition                                     PKF Texas raises more than
                                                                                                                $8,700 for the American
                                                • For the third year in a row, the Houston Business Journal
                        at a Glance               recognized PKF Texas as one of Houston’s Best Places to       Heart Association
                                                  Work for the organization’s sincere commitment to             Each year, PKF Texas team members
                                                  employees.                                                    participate in the American Heart Walk
                                                • Karen Love, director of Business Development, was             to raise money to fund research and
                                                  recently honored during the American Heart Association        education for heart disease and stroke—
                                                  Leadership Conference with a Distinguished Service            the number one and number three killers
                                                  Award. A research grant of up to $124,000 was named in        of both men and women in the United States. This past year,
                                                  Karen’s honor.                                                the teams started in June—and set their goals high—for the
                                                • WebCPA ( named PKF Texas Webstar               Walk on Nov. 1. Through teamwork and dedication to this
                                                  of the Week in recognition of an outstanding Web site!        worthy cause, the teams surpassed their goal and raised
                                                  The PKF Texas site was relaunched in March 2003.              $8,724 for the AHA—more than $1,000 more than the
                                                • For the second year in a row, PKF Texas was named one         already high goal.
                                                  of Accounting Today’s Technology Pacesetters. This high-         Some facts that helped these teams to maintain their focus:
                                                  ly regarded list recognizes the accounting profession’s       • Less than 7 percent of the AHA annual budget goes to
                                                  leading technology consultants and resellers.                    salaries and administrative costs; the rest goes straight into
                                                                                                                   education, community service and research.
                                                                                                                • One person dies every 29 seconds from heart disease.
                                                           Talent & expanded service areas                      • Twenty-seven million children already have high cholesterol.
                                                             • Byron M. Hebert, CPA, joined PKF Texas as a      • AHA research funds have yielded many important discov-
                                                            director in the Entrepreneurial Advisory Services      eries, such as CPR, life-extending drugs, open heart
                                                          (EAS) group, a team dedicated to helping small- and      surgery and the first biological pacemaker.
                                                   middle-market companies operate more profitably. With        • Three Nobel prizes were awarded to researchers AHA
                                                   the addition of Hebert, the EAS group’s profit enhance-         funded at key points in their careers.
                                                   ment capabilities will expand to include turnaround man-        PKF Texas is already making plans for the Walk in 2004.
                                                   agement, process mapping and improvement, reengineer-        Join us in this worthy cause by participating in the walk or
                                                         ing, systems implementation, and identification and    through a donation and help save lives. e
                                                           tracking of key performance indicators.
                                                            • Brian Baumler, CPA, was named a shareholder
                                                           in the Audit practice.
                                                        • Recent promotions to manager include Rafael
    12                                             Carsalade, Tax manager; Raissa Evans, Marketing man-                                                   VOLUME 4   ■   ISSUE 3   ■   2004
                                                   ager; and Robbie Trahan, Tax manager.

                   FL A
                   FAIR LABOR STANDARDS ACT

                                                  ARE YOU IN COMPLIANCE?
                                                  O    riginally enacted in 1938, the Fair Labor Standards
                                                       Act has been amended many times, but it is still
                                                  the main law affecting workers’ pay. It is the federal
                                                  statute that established protections for minimum
                                                  wage, premium pay for overtime hours of nonsupervi-
                                                  sory employees and protection of children who are
                             THERE’S A QUAINT        It does not regulate vacation, holiday, severance or
                       LITTLE LAW THAT’S BEEN     sick pay, meals, premium pay for weekend or holiday
                                                  work, shift differentials, pay raises or fringe benefits.
                       ON THE FEDERAL BOOKS
                                                     “The act encourages employers to hire more people
                       SINCE THE DEPRESSION.      versus having current employees work more hours,”
                            WHAT YOU MAY NOT      says Lari Braun, human resources manager at Leading
                           REALIZE IS THAT THE    Edge accounting firm Henry & Horne in Tempe, Ariz.
                   FAIR LABOR STANDARDS ACT       “It also ensures that people are able to earn a decent
                            IS STILL IN EFFECT,
                          AND YOUR BUSINESS       continued on next page
                             NEEDS TO COMPLY.

THE LEADING EDGE                                                                                        13

                                    continued from previous page                                      Interstate commerce is a very broad term, according to
                                                                                                   Braun. To understand just how broad, consider that
                                    Who is impacted by the FLSA?                                   employees who are engaged in interstate commerce
                                    “All employers who are engaged in interstate commerce or       include those who:
                                    the production of goods for interstate commerce are sub-       • Produce goods (such as a worker assembling compo-
                                    ject to the FLSA,” according to Tyler A. Ridgeway, an attor-      nents in a factory or a secretary typing letters in an
                                    ney and executive recruiter with Leading Edge accounting          office) that will be sent out of state
                                    firm Kreischer Miller in Horsham, Pa. In this age of the       • Regularly make telephone calls to other states
                                    Internet, that includes most employers, as well as:            • Handle records of interstate transactions
                                    • Businesses that are not engaged in interstate commerce       • Travel to other states as part of their job
                                       but have at least two employees and do at least             • Do janitorial work in buildings where goods are pro-
                                       $500,000 in business per year                                  duced for shipment outside the state
                                    • Hospitals, government agencies and schools                      “You’ve got to understand the overall law and what it’s
                                    • Construction enterprises, laundries and cleaners that        about,” says Braun. That includes understanding which
                                       were in business on March 31, 1990                          of your employees are exempt from the FLSA. Upper-level
                                    • Retail enterprises with 1989 sales of at least $362,500      executives also are exempt from the FLSA. Typically a salaried
                                       (and nonretail enterprises with sales of at least           employee will be exempt if his or her primary duty consists
                                       $250,000) that were in business on March 31, 1990           of the management of the enterprise or of a customarily rec-
                                                                                                   ognized department or division of the enterprise, and if that
                                                                                                   primary duty includes the customary and regular direction
                                                                                                   of two or more other employees.
                                                                                                      CPAs are exempt because they are classified as profes-
                                                                                                   sional employees. “Advanced knowledge in a field of learn-
                                                                                                   ing normally acquired through a prolonged course of spe-
                                                                                                   cialized instruction,” says Braun.
                                                                                                      Ridgeway advises employers to consider the following
        “YOU’VE GOT TO                                                                             multi-prong test when determining whether or not
                                                                                                   employees are exempt.
        LOOK AT JOB DUTIES                                                                         • Are employees paid a salary? If not, employees are non-
                                                                                                      exempt and the test is complete. If yes, the test continues.
        TO MAKE SURE THEY                                                                             • Are they an executive, directing the work of others?
        ARE CLEARLY                                                                                   • Are they administrative, engaged in non-routine
                                                                                                         office or non-manual work?
        DEFINED AND YOU ARE                                                                           • Are they professional, engaged in work requiring
                                                                                                         knowledge or an advanced degree?
        CLEARLY COMPLIANT.”                                                                           • Are they a computer professional?
        — LARI BRAUN,                                                                                 If you answered no to the last four questions, your
          HENRY & HORNE
                                                                                                   employee is non-exempt.
                                                                                                      The final test is the employee’s salary level, according to
                                                                                                   Ridgeway. “The salary must be $155 per week or $8,060
                                                                                                   per year,” he says.
                                                                                                      To be exempt, a position must pass these tests.
                                                                                                      “Examples of exempt employees include lawyers,
                                                                                                   department heads, executive assistants, account execu-
                                                                                                   tives, physicians, personnel directors and tax specialists.
                                                                                                   Non-exempt employees include clerks, bank tellers, secre-
                                                                                                   taries, inspectors, trainees and bookkeepers,” says
                                                                                                      Braun says that sometimes employers may try to classify
                                                                                                   non-exempt employees as exempt to avoid paying overtime.
                                                                                                   “You’ve got to look at job duties to make sure they are clear-
                                                                                                   ly defined and you are clearly compliant,” she says.
                                                                                                      The FLSA regulations are all about duties, not job titles.

  14                                                                                                                                    VOLUME 4   ■   ISSUE 3   ■   2004
                                                                                                                          IMPORTANT       POINTS FOR
                                                                                                                          EMPLOYERS TO CONSIDER:
“It’s important to document titles, expectations and        • 40 hours in a non-school week
work performance because if the U.S. Department of          • Hours between 7 a.m. and 7 p.m. (except from
Labor comes in to investigate, they will look at duties        June 1 through Labor Day, when evening hours               ■ Employees cannot be exempt
and ask whether or not the employee really is                  are extended to 9 p.m.)                                       and non-exempt.
exempt,” she says.                                             The FLSA also protects children from dangerous
                                                                                                                          ■ Compensatory time must be approved in
                                                            jobs, such as mining and manufacturing. “If you own              advance.
Other protections                                           a manufacturing company, your children can open
The FLSA sets a number of other protections.                the mail or push a broom, but they can’t be on the            ■ If a non-exempt employee attends an
   Minimum wage: The federal minimum wage is                factory floor,” says Braun.                                      off-site seminar, the employer is not
$5.15 an hour. Many states also have higher mini-              Other requirements: Employers must advise                     obligated to pay overtime if:
mum wage requirements than the federal wage. “If            employees of their rights under the act. The
                                                                                                                             ■ Attendance is outside of regular
your business is covered, you must pay all covered          Department of Labor’s Wage and Hour Division will                    working hours,
employees at least minimum wage,” says Ridgeway.            provide you with posters that must be displayed in a
   Equal pay for equal work: “Your company also             place where all employees will see, read and under-              ■ Attendance is voluntary,
must provide both equal pay and equal benefits to           stand them.
                                                                                                                             ■ The employee does not do productive
men and women who perform the same job or jobs                 The FLSA does not apply to independent con-
                                                                                                                                 employer-related work during the
that require equal skill, effort and responsibility,”       tractors. “You need to look at who controls the                      seminar, and
he adds.                                                    work,” says Ridgeway. “When an independent con-
   For example, in a manufacturing plant, 20                tractor does work, he or she, not the employer, must             ■ The program is not directly
employees are male and have been working there              control how the work is done. If the employer is                     related to the employee’s job.
for 10 years. In 2004, the plant hires 10 females. If       controlling that process, the Wage and Hour
the workers are doing equal work, the plant can             Division might determine the contractor is in fact an         ■ There’s no limit on working hours for
                                                                                                                             non-exempt employees.
pay the males more if they currently award raises           employee,” he says.
based on an employee’s workplace longevity. If both            As an employer, your recordkeeping must be dili-           ■ Make sure to communicate to
a man and a woman were hired at the same time,              gent. “Your company must keep records for every                  employees whether they are exempt or
the plant would have to pay the same rate, says             employee for each pay period for the past three                  non-exempt. “Talk about the various
Ridgeway.                                                   years, detailing every employee’s pay rate and hours             clarifications so people know,” says
   Overtime pay: Non-exempt workers must be paid            worked that period.”                                             Lari Braun, human resources manager
at least one and a half times their regular pay rates                                                                        at the Leading Edge accounting firm
                                                            Consequences of non-compliance                                   Henry & Horne in Tempe, Ariz.
for overtime. “This is calculated per week and the
workweek can begin on any day established by an             “Let’s say someone typically works 40 hours a week,              “What sends employees to compliance
                                                            but due to job demands has been working 50 or 60                 agencies is that they don’t know.”
employer. Based on 40 hours per week, an employ-
ee can work 10 hours in one day and six hours in the        hours a week,” says Braun. “If people get disgrun-
                                                            tled, they might call the Department of Labor to              ■ Make non-exempt employees record
next,” he says.                                                                                                              actual hours worked. e
   Compensatory time: Say a non-exempt employee             make them aware,” she says.
works hard on a project deadline and works 10                  The Wage and Hour Division of the Department
hours Monday through Thursday. Instead of provid-           of Labor enforces FLSA. “They can conduct a com-
ing overtime on Friday, the employer can give Friday        pany audit with no specific complaints. If a violation
off to that employee and not have to pay overtime.          is found, the company could be forced to pay over-
The key is to ensure that the worker only worked 40         time wages and several fines,” adds Ridgeway.
hours that week.                                               Violations can include improper exempt status
   “Be careful on working private deals with employees,”    classification, minimum wage mistakes and overtime
says Ridgeway. “It just takes one disgruntled employee to   not paid as required.
get the company reported and in a lot of trouble.”             Criminal penalties can be levied in certain cir-
                                                            cumstances. “Wage and Hour representatives also           the federal law, deference is given to the law that pro-
   Child labor: FLSA has designed rules to discourage
                                                            can recommend changes. If an investigator shows up        vides greater protection to the employee, according
children from dropping out of school. It sets the min-
                                                            at your company, be courteous and helpful but do          to Ridgeway.
imum age for non-agricultural employment at 14.
                                                            not meet personally with him or her. Direct them             “Remember, the FLSA applies to you,” says
Hours worked by 14- and 15-year-olds are limited to:
                                                            immediately to your company’s human resource              Ridgeway. Many companies are experiencing growth,
• Non-school hours
                                                            professional,” advises Ridgeway.                          but are reluctant to hire more employees. Ridgeway
• Three hours on a school day                                  The FLSA applies to all states and allows states to    and Braun caution that pushing your non-exempt
• 18 hours in a school week                                 regulate areas not covered by the act to afford work-     employees without compensating could lead to a
• Eight hours on a non-school day                           ers increased protection. If a state law conflicts with   visit from the Department of Labor. e

THE LEADING EDGE                                                                                                                                                          15


     BIRTH OR ADOPTION, MARRIAGE, DIVORCE, PURCHASE OR SALE OF A HOME OR BUSINESS, ILLNESS, DEATH OF A SPOUSE,      You’ve graduated from college and you’re ready to start
                                                                                                                    time away, but now is the time to start thinking about
                                                                                                                    saving for retirement. “When starting out in your first
     OUS OR, IN THE CASE OF DEATH OR DIVORCE, DO NOT BECOME EVEN MORE PAINFUL.                                      real job, saving for retirement is something you should
                                                                                                                    be thinking about,” says David Borden, director of
                                                                                                                    investments at Leading Edge accounting firm CCR
                                                                                                                    Group in Worcester, Mass. Most businesses today have
                                                                                                                    some kind of retirement plan, such as 401(k) or 403(b),
                                                                                                                    that allows saving for retirement to be fairly painless.
                                                                                                                       “Even if you’re only saving a small amount when
                                                                                                                    you’re young, it will be well worth it,” he says.
                                                                                                                       But maybe after working a few years, you meet the
                                                                                                                    person of your dreams, and now you’re planning to
                                                                                                                    marry. “Get it all out on the table,” advises Borden—stu-
                                                                                                                    dent loans, revolving debt, child support. “Be realistic
                                                                                                                    about your income and work with a financial adviser
                                                                                                                    who can help come up with a good savings schedule.
                                                                                                                    Working with a professional helps take emotion out of
                                                                                                                    the planning,” he says.
                                                                                                                       Realize that you no longer have his-and-hers debts.
                                                                                                                    “You now have joint assets and joint liabilities. Pay the
                                                                                                                    debt off as it comes in. If you start saving now, rest
                                                                                                                    assured that you will retire someday. People who look
                                                                                                                    at retirement in their 20s and 30s will be much better
                                                                                                                    off when retirement arrives,” says Borden.
                                                                                                                       Have a frank and honest discussion about lifestyle.
                                                                                                                    There’s a tradeoff to everything. “You have to decide
                                                                                                                    what’s important to you as a couple. Is it the big house?
                                                                                                                    I know many couples that are home poor. Is that how
                                                                                                                    you want to be? Remember that there’s always room to
                                                                                                                    improve down the road. Sometimes you’re better off
                                                                                                                    going below what you can afford. The housing market
                                                                                                                    appreciates at every level,” Borden says.
                                                                                                                       “You don’t want to avoid saving for retirement and
                                                                                                                    your children’s education because all of your income is
                                                                                                                    going into a mortgage,” he says.
                                                                                                                       And once you have children, you must have a will
                                                                                                                    and an estate plan that includes all your children,
                                                                                                                    according to Peri Ann Aptaker, director of financial
                                                                                                                    planning at Leading Edge accounting firm Kahn,
                                                                                                                    Litwin, Renza & Co. in Providence, R.I. This means
                                                                                                                    reviewing your plan after the birth of every child. “You
                                                                                                                    could inadvertently disinherit them. And if you lose a

     16                                                                                                                                             VOLUME 4   ■   ISSUE 3   ■   2004
child and he or she has assets in their name, you need               When a spouse dies, there is money going out and                 With the deferred status of student loans, families
to take care of that, too.”                                       money coming in. If the spouse who died handled all              are much better off taking out loans and letting their
   All states deal with the deaths of people without              the money, there’s a real education to go through for            children pay them off.
wills differently. “If you don’t have a plan, you may have        the surviving spouse.                                               “In today’s environment, it’s good debt, low interest
inadvertently adopted an heir called the IRS, and Uncle              Many people look at their estate plan every three to          and deferred,” says Borden. “People don’t realize how
Sam goes to a lot of family reunions,” says Aptaker.              five years, but so much changes during that time,                much money you need to retire. A million dollars is
                                                                  especially laws regulating estate plans, says Borden.            not what it used to be. There is no magic number. It’s
Planning for the unthinkable                                      “The cost of not being prepared far outweighs the cost           how you want to live in retirement that matters.”
Unfortunately, one of life’s biggest financial events also        of keeping the plan current,” he says.                              Early on, it’s better to set more realistic expecta-
is the end of a marriage. Divorce puts a big strain on               The cost of a checkup (about $500) is well worth              tions for investment returns. “Returns of 6 percent to
the financial future of divorcees.                                the money.                                                       7 percent are more realistic than the standard 10 per-
    “If you do get remarried, you can end up supporting                                                                            cent. It’s better to be pleasantly surprised than disap-
two families. For a spouse paying alimony, there’s not a          Pre-retirement and retirement                                    pointed,” says Borden.
lot of incentive to get remarried. For those who do,              People today are planning more, but not necessarily                 Planning should not be considered a fruitless exer-
they often wind up with double the monthly expenses               doing it correctly. “There are all kinds of tools on the         cise. Sometimes it’s your own reassurance that you’ve
and double the burden of college costs,” Aptaker says.            Internet that are helpful, but not accurate and detailed         made the right decisions. And as you near retirement,
    When you or your spouse files for divorce, you                enough to provide a clear picture for your future,”              that’s reassurance that many seek.
should visit your accountant, as well as your attorney.           says Borden, adding that these tools give people a                  “People are so scared to fully retire. Once you let go
“Understand what you may end up with and your abil-               false sense of security with regard to planning.                 and retire, there’s no turning back and no earning that
ity to live within those means. Both parties need to be              Pre-retirement, those years before actual retire-             level of income any more,” says Borden.
aware of what assets they possess. If there’s a disparity,        ment, are critical.                                                 The good news is that it’s never too late.
you may want to consider a prenuptial agreement for                  “Too many people put their children’s education                  Some people are more diligent about planning,
any future marriages. If you’re in a second marriage              before their own retirement. When they deplete their             but others need to be pushed. “If you’re nearing
and there are kids from both previous marriages, you’ll           retirement funds, it’s almost impossible to save in that         retirement age, sit down with your financial adviser
need to adjust your estate plan to make sure the right            short period of time they have left to work,” says               to see what changes you need to make to preserve
money goes to the right kid,” says Aptaker.                       Borden.                                                          your assets. Your adviser will help you plug the
    Any change in your health that might affect your                 Aptaker agrees. “So many people try to pay for col-           dike first and then work on the bigger issues,” says
insurability (life, health, long-term care) also needs to         lege and retirement at the same time. That’s impossi-            Aptaker. e
be considered.                                                    ble, and not necessary.”

I  f you own your own business, that business has different
   lifecycle events and financial ebbs and flows. You’ll have
peak times when you’re expanding and down times when
                                                                     “You need to find the right button and put the fear of
                                                                  God in them to get them to understand just how important
                                                                  planning is,” says Aptaker.
                                                                                                                                   to pay for something new than to pay for something that’s
                                                                                                                                   already there,” says David Borden, director of investments at
                                                                                                                                   Leading Edge accounting firm CCR Group in Worcester, Mass.
you need to be fiscally conservative. As a business owner,           Here are some questions to ask yourself today to prevent          For example, the medical profession has been particu-
you’ll need to take different financial steps for security ver-   “tomorrowitis”.                                                  larly hard hit due to HMO reforms. Today, it’s not worth the
sus someone who works in middle management for a large            • Do I have the right insurance?                                 hassles to take over a practice from a retiring physician. It’s
corporation.                                                      • Have I implemented the appropriate exit strategy?              much simpler to start your own, even if the business has
   Many closely held business owners suffer from what Peri        • What is my exit strategy? Sell, transition or leave it to      been passed on to family members, says Borden.
Aptaker, director of financial planning at Leading Edge              the kids?                                                         To make that transition successful, Borden recommends
accounting firm Kahn, Litwin, Renza & Co. in Providence,          • What’s the true value of my business?                          that you communicate and be open and honest, work with
R.I., calls “tomorrowitis.” These people:                         • What’s my business truly worth?                                an unbiased professional who can review your financial
A. Don’t think they are ever going to die.                           Talk to someone in your industry about how to obtain a true   plan and goals, and follow through with the plan. “About 30
B. Think they always can make enough money.                       value, keeping in mind that a business may be worth more on      percent of people who pay for a plan and go through the
C. Believe that their business is worth 10 times more than        paper than its eventual price tag will show. “So many people     first two steps don’t see it through implementation. All the
   its actual worth.                                              make that mistake. In today’s lower interest rate environment    planning in the world won’t help unless you follow the
D. Think they can deal with planning issues later.                and very pro-business economy, it’s often more advantageous      plan,” he says. e

THE LEADING EDGE                                                                                                                                                                              17

                                                         From zero to big business in 60 days
                                                              tarting a business from scratch is no easy      “Everyone was on a steep learning curve
                                                         S    task. But getting a world-class museum
                                                         administratively ready for opening in a few
                                                                                                           and we added gradually to the things we
                                                                                                           needed. We broke the tasks down into what-
                                                                                                                                                              “EVERY DAY WE WOULD
                                                         short months is seemingly insurmountable.         ever we needed to get the building open first;     FACE A PROBLEM,
                                                             While most businesses start out smaller
                                                         with decisions made accordingly, the Nasher
                                                                                                           then whatever was needed to get art here
                                                                                                           safely, installed and ready for public viewing;
                                                                                                                                                              SOLVE IT AND THEN
                                                         Sculpture Center in Dallas, Texas, had to go      and finally what was necessary to open the         MOVE ON.”
                                                         from zero to big business in 60 days.             museum to the public,” says Hightower.             — LISTA HIGHTOWER, DIRECTOR OF FINANCE,
                                                             “It was like starting a big business from        And it worked because The Nasher                  THE NASHER SCULPTURE CENTER
                                                         scratch with no policies, procedures or ven-      Sculpture Center—dedicated to contempo-
                                                         dors,” says Lista Hightower, director of          rary and modern sculpture and based on
                                                         finance for the center. She started at the        the private collection of Raymond D.                   Working within the building itself is like
                                                         center on Aug. 18, 2003, and didn’t move          Nasher and his late wife, Patsy—welcomed           working in a piece of art, says Hightower.
                                                         into the gallery until one month before its       7,650 visitors on its first day.                   The architects and builders had major
                                                         Oct. 20 opening.                                     “It’s a very exciting place to be right now,”   design limitations—shoehorning adminis-
                                                             “This was a classic case of what comes        explains Hightower. “Every day we come to          trative operations into the building was a
                                                         first, the chicken or egg. So many things         work and there are a million substantive           great challenge.
                                                         had to be done. We needed computers, so           things to do. Sometimes it’s simply nitpick-           `For example, cash registers at the ticket-
                                                         we researched and purchased computers. If         ing over details, but all these things are         ing and admissions counters were installed
                                                         we had to send something by courier, we           important.”                                        two days before the museum opened. The
                                                         had to research a courier service.                   For example, Hightower needed to order          admissions ticketing area would not accom-
                                                                                                           check stock that incorporated the museum’s         modate an employee who was in a wheel-
                                                                                                           logo and looked aesthetically complemen-           chair because the cash drawers were four
                                                                                                           tary to the museum, with limited options           inches. “So we were able to get the three-
                                                                                                           that would work with financial software.           inch cash registers in time for opening.
                                                                                                              Designed by architect Renzo Piano of            Every day we would face a problem, solve it
                                                                                                           Italy and landscape architect Peter Walker,        and then move on,” she says.
                                                                                                           the entire 55,000-square-foot facility                 “We run a lot of different businesses in
                                                                                                           includes the gallery, auditorium, offices and      one. We exhibit art, have an education pro-
                                                                                                           café and museum store. Situated in down-           gram, offer membership and member bene-
                                                                                                           town Dallas at the base of the city’s skyline,     fits, operate a museum store, offer tours and
                                                                                                           the Nasher Sculpture Center represents             employ teams of docents and volunteers all
                                                                                                           Nasher’s vision to create an outdoor “roof-        in this one place. It’s exciting and challeng-
                                                                                                           less” museum that serves as a public home          ing to make it work.”
                                                                                                           for his collection. Spanning an entire city            The museum itself has been very well
                                                                                                           block, the front third of the land is the          received both in the United States and
                                                                                                           building and the back two thirds is a garden       internationally. “No other museum is dedi-
                                                                                                           for exhibiting outdoor sculpture.                  cated solely to sculpture. Mr. Nasher had
                                                                                                                Nasher, 82, paid for the entire center.       opportunities to have his sculpture exhibit-

                                                                                                           Hightower explains that the museum has             ed in other cities. Dallas is fortunate to have
                                                                                                           corporate sponsors for exhibitions and is          him keep it here,” says Hightower. e
                                                                                                           beginning to fundraise, but Nasher, one of
                                                                                                                                                              The Nasher Sculpture Center is a client of Leading Edge
                                                                                                           the first real estate developers in the United     accounting firm Lane, Gorman Trubitt in Dallas. The firm
                                                                                                           States, continues to fund the museum. He           has assisted the museum with selecting software, certain
                                                                                                           built his first retail shopping center,            personnel and conducting audit work.
                                                                                                           NorthPark Center, in 1965 and made a com-
                                                                                                           mitment to display his art in his develop-
                                                                                                           ment projects. He is chairman of The Nasher
                                                                                                           Foundation and of Comerica Bank-Texas.

                                              18                                                                                                                                        VOLUME 4   ■   ISSUE 3   ■   2004
                                                 T H E U N I T E D S T A T E S                                                        O F           A M E R I C A

        J A P A N

    S C O T L A N D

   E N G L A N D                                                                                     C A N A D A
Alpern Rosenthal                        Karns, Murakami & Hanashiro, LLP
Pittsburgh, PA                          Honolulu, HI
Argy, Wiltse & Robinson, P.C.           Keiter Stephens Hurst Gary & Shreaves     The Leading Edge Alliance is an alliance of major independently owned accounting
Washington, D.C.                        Glen Allen, VA
                                                                                  and consulting firms that share an entrepreneurial spirit and a drive to be the premier
Baden, Gage & Schroeder, LLC            KGN Financial Group
Fort Wayne, IN                          Chicago, IL                               provider of professional services in their chosen markets. Leading Edge members are CPA
Beach Fleischman & Co.                  Kostin Ruffkess & Co., LLC                firms that are preserving the core quality and integrity of the public accounting profession
Tucson, AZ                              Hartford, CT
                                                                                  while stimulating growth and progress through innovative practices.
Brady Ware                              Kreischer, Miller & Co.
Dayton, OH                              Philadelphia, PA
Brown, Edwards & Co., LLP               Lane Gorman Trubitt, LLP
Bluefield, WV / Roanoke, VA             Dallas, TX
Brown Schultz Sheridan & Fritz          Lattimore Black Morgan & Cain, P.C.
Harrisburg/Lancaster, PA                Nashville/Knoxville, TN                   The Leading Edge offers:
Carlin, Charron & Rosen LLP             Lurie Besikof Lapidus & Co., LLP
Mass., Conn., RI                        Minneapolis, MN                           • Access to the best and brightest teams of business advisers—a peer-to-peer
Clark Nuber P.S.                        Marcum & Kliegman, LLP                      connection that provides the right solutions for clients.
Seattle, WA                             New York, NY
                                        George Town, Grand Cayman                 • Innovative, practice-proven strategies for improving performance in management,
Ehrhardt Keefe Steiner & Hottman
Denver, CO                              Morrison, Brown, Argiz & Farra, LLP         business processes, finance, operations, information technology and marketing.
                                        Miami, FL
Freed Maxick & Battaglia, PC
Buffalo/Rochester, NY                   O’Sullivan Creel, LLP                     • A leading knowledge resource for multi-disciplinary information and industry-specific
                                        Pensacola, FL
Fuller Landau LLP                                                                   expertise responsive to clients’ unique needs.
Toronto, Ontario and Montreal, Quebec   Pannell Kerr Forster of Texas, P.C.
                                        Houston, TX
Gifford, Hillgass & Ingwersen                                                     • The strength to attract the highest quality team members.
Atlanta, GA                             Postlethwaite & Netterville, APAC
                                        Baton Rouge/New Orleans, LA
H. W. Fisher & Co.                                                                • The ability to service clients worldwide. The alliance offers accounting and consulting
London, England                         SS&G Financial Services
                                        Akron/Cleveland/Cincinnati/Columbus, OH     services through a global network of firms, with 245 offices in more than 68 countries.
Haskell & White, LLP
Irvine, CA                              Stonefield, Josephson, Inc.
                                        San Francisco/Los Angeles, CA             • The Leading Edge Alliance offers world-class business advisory expertise
Henry & Horne, P.L.C.
Tempe/Scottsdale/                       Suby Von Haden & Associates                 and experience with innovation, progressiveness and quality.
Casa Grande/Pinetop, AZ                 Madison/Milwaukee, WI
Hongo Accounting, Inc.                  Warren, Averett, Kimbrough
Tokyo, Japan                            & Marino, LLC
                                        Birmingham, AL
Johnston Carmichael
Edinburgh/Glasgow/                      Wilson, Price, Barranco,
Aberdeen/Inverness, Scotland            Blankenship & Billingsley
                                        Montgomery, AL                            To find out more about The Leading Edge Alliance, visit or call
Baltimore, MD                           Wiss & Co., LLP                           Karen Kehl-Rose, Executive Director, at (630) 513-9814, or e-mail
                                        Livingston/Red Bank, NJ
Kafoury, Armstrong & Co.
Reno/Las Vegas, NV                      Yeo & Yeo, P.C.
                                        Saginaw, MI
Kahn, Litwin, Renza & Co.
Providence, RI

THE LEADING EDGE                                                                                                                                                                 19

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