Skoda Minotti CPE Day - 2017 (Part 1)

Welcome to the
2015 Annual Meeting
November 2, 2015

Opening Remarks
Greg Skoda, CPA
November 9, 2017

Trump Tax Changes:
How They Could Impact You and Your Business
Jim Forbes, CPA and Shaun Zalewski, CPA
November 9, 2017

4
Agenda
• Overview
• Proposed business tax changes
• Proposed individual tax changes

5
100-Day Plan
Middle-class Tax Relief And Simplification Act
• An economic plan designed to grow the economy 4% per
year and create at least 25 million new jobs through
massive tax reduction and simplification, in combination
with trade reform, regulatory relief and lifting the
restrictions on American energy
Repeal and Replace Obamacare Act
• Fully repeals Obamacare and replaces it with Health
Savings Accounts, the ability to purchase health insurance
across state lines and lets states manage Medicaid funds

6
Timeline
Original Plan
• Repeal and replace Obamacare
• Then address tax reform
Affordable Care Act
• Unsuccessful repeal in March 2017
• House will not seek to repeal ACA as part of tax reform
legislation

7
Timeline
Tax Reform
• April 20 – Mnuchin says “pretty close” to bringing “major tax
reform. Will not “take ‘til the end of the year.”
• November 2 – “Tax Cuts and Jobs Act of 2017”. Generally
effective for tax years beginning after 2017.
• November 6 – House Ways and Means Committee to review
Three principals for tax reform:
1. Simplifying the personal tax code
2. Providing tax relief to the middle class
3. Businesses get a competitive tax rate

8
Business Rate Changes
Reduction in corporate tax rate
• Reduce rate from 35% to 20% for regular “C” corporation
(Original Trump plan was to reduce to 15%)
 25% rate will apply to personal service corporations (CPA firms,
law firms)
• 25% rate for pass-through income (sole proprietors,
partnerships, LLCs and S corporations)
• The “Border Adjustment” not part of the proposal

9
Pass-Through Rate Reduction
Rate reduction for pass-throughs
• S corporations, partnerships, LLCs
• “Capital percentage” taxed at 25% rate
 Owners can elect to apply a “capital percentage” of 30% to net
business income (including wages). Remaining 70% taxed at
ordinary rates.
 Alternative is facts and circumstances based on formula.
 Capital invested in the business X rate of return (federal short-term
interest rate plus 7%). If elected, binding for five years.

10
Pass-Through Rate Reduction
• Capital percentage cannot be lower than actual wages
 Wages $90K, pass-through income $10K = $100K business
income
 30% of business income = $30K favorable rate; $70K ordinary rate
 However, $90K would be “ordinary income” since wages = $90K
• Passive business owners still taxed at ordinary rates
 Look to material participation rules (IRC 469)
• Original Trump plan was all pass-through business income
taxed at 15%

11
Business Expensing
Full expensing of capital expenditures
• Immediate expense of “qualified property” acquired and
placed in service after September 27, 2107 and before
January 1, 2023. (Trump plan was only for manufacturing
equipment)
• Effort to reshape the business code to more of a
consumption tax
• Section 179 deduction increased to $5M
for years after 2017 and before 2023
• Phase-out increased to $20M

12
Interest expense
Cap on net business interest expense (every business,
regardless of form)
• Limited to 30% of “adjusted taxable income”
• Adjusted taxable income = Taxable income without regard to:
 Net interest expense
 NOLs
 Depreciation, amortization and depletion
• Unused expense carried forward five years
• Businesses with less than $25M average annual gross
receipts exempt

13
Business Credits
Repeal of most business incentives
• R&D credit would be retained
• Low income housing credit retained
• Repealed
 New markets tax credit
 Work opportunity tax credit
 Rehabilitation tax credit
 Employer provided child care credit
 Expenditures to provide access to disabled individuals

14
Net Operating Losses (NOL)/AMT
NOLs limited to 90% of taxable income
• Effectively creating a 2% effective tax rate (10% of taxable
income not offset by NOL x 20% tax rate)
Corporate AMT repealed
• Corporations with AMT credit can get 50% of credit
refunded

15
Accounting Methods
Expanded use of cash method of accounting
• Businesses with gross receipts of $25M or less permitted
to use cash method. Including those that have inventory.
(Currently under $1M)
UNICAP
• Businesses with gross receipts of $25M or less are
exempt.
Long-term contracts
• Businesses with gross receipts of $25M or less can use
completed contract method. (Currently $10M)

16
International Provision
Current rule
• U.S. entities generally taxed on U.S. income
• Earnings of foreign subsidiaries generally
not taxed until brought back to the U.S.
Deemed repatriation of offshore profits
• 12% tax rate on cash and cash-equivalents
• 5% on non-cash earnings and profits

17
Deemed Repatriation Provision
Deemed repatriation of offshore profits
• One-time transition tax on previously untaxed foreign
earnings
• Post-1986 E&P not previously subject to U.S. tax
• Taxpayer may elect to pay this tax liability
over a period of up to 8 years

18
Miscellaneous Provisions
• Like-kind exchanges only allowed for real property
• Domestic production activities deduction (manufacturing
deduction) repealed
• Entertainment expenses – no deduction allowed
 Previously 50%
 Meals still 50% deductible

19
Planning for the change
In Summary:
• Lower corporate tax rate does not necessarily mean lower
taxes
• Consider disallowed interest
• Loss of manufacturing deduction
• Loss of tax credits
• Limitation on use of NOLs
• If law is passed, run 2017 and 2018 projections

20
Individual Rate Changes
Rate reduction and fewer brackets:
• Current brackets: 10%, 15%, 25%, 28%, 33%, 35% and
39.6%
 2017 highest rate applies at $418,400 for single,
$470,700 for married
• Proposed brackets under Tax Cuts and Jobs Act:
12% 25% 35% 39.6%
MFJ / Surviving
Spouse
$0 - $89,999 $90,000 - $259,999 $260,000 - $999,999 $1,000,000 +
Head of
Household
$0 - $67,499 $67,500 - $199,999 $200,000 – $499,999 $500,000
MFS / Single $0 - $44,999 $45,000 - $129,999 $130,000 - $499,999 $500,000

21
Investment Income Changes
Capital gains and qualified dividends
Interest income
• The proposal has no changes to how interest income is
taxed.
0% 15% 20%
MFJ $0 - $77,199 $80,000 - $478,999 $479,000 +
H.O.H. $0 – $51,699 $51,700 - $478,999 $425,800 +
MFS $0 - $38,599 $38,600 - $239,499 $240,000 +
Single $0 - $38,599 $38,600 - $425,799 $425,800 +

22
Medicare and Net Investment Tax
Additional taxes that were created under the ACA
• Additional Medicare (0.9% on self-employment or wages over $200,000;
single filers or $250,000 MFJ)
• Net Investment Income Tax (3.8% on investment income over $200,000
for single filers and $250,000 MFJ)
Under the Tax Cuts And Jobs Act there is no specific
mention of repealing either of these taxes
Would be repealed if the ACA is repealed

23
Itemized Deductions
Itemized deductions
• Currently no cap on overall itemized deductions
• However, subject to phase-out for higher income
taxpayers
• Up to 80% of itemized deductions can be phased out
Proposed itemized deductions
• Repeal many of the current deductions

24
Itemized Deductions
Deductions repealed
• Personal casualty loss, tax preparation fees, medical expenses,
unreimbursed business expense, moving expense, state and local
income / sales taxes
Mortgage Interest
• Retain current $1 million cap for mortgages prior to November 2, 2017
• New deduction would be capped at $500,000 (MFJ) or $250,000 (MFS)
• One qualified residence
Real Estate Taxes
• Capped at $10,000
Charitable Donations – no material changes

25
Standard Deduction and Exemption
Standard deduction and personal exemptions
• Currently $12,700 for joint filers, $6,350 for single filers (2017)
• Personal exemption: $4,050
Proposed standard deduction and personal exemptions
• $24,400 for joint filers, $18,300 unmarried with one qualifying child,
and $12,200 for single filers
• For anybody claimed as a dependent the standard deduction is the
lesser of $500, or earned income plus $250.
• Eliminate personal exemptions

26
Standard Deduction and Exemption
Is the increased standard deduction more beneficial?

27
Child Tax Credit
Increase the credit from $1,000 currently to $1,600
• Change the qualification from a “qualifying child” to a “qualified
dependent”
• Allow for a $300 credit for non-child dependents
Increase the phase-out limits
• Currently MFJ phase-out begins at $110,000 MFJ and $75,000 for
single taxpayers
• Change the phase out limits to $230,000 MFJ and $115,000 for
single taxpayers

28
Nonrefundable Credits Eliminated
The following credits would be eliminated under the Tax Cuts
And Jobs Act:
• Elderly or disabled
• Adoption
• Government Mortgage Credit
• Plug-in electric drive motor vehicles
• Effective for motor vehicles placed in
service after December 31, 2017

29
Education Credits
Create an enhanced American Opportunity Credit
• Same benefits as the current law
• 100% credit of first $2,000 of qualifying expenses and 25% on $2,500
of additional expense for a maximum credit of $2,500 (up to $1,000
refundable)
• Repeal Lifetime Learning Credit & Hope Scholarship Credit
• Credit limited to first five years of post secondary education, with the
fifth year coming at a reduced rate and $500 refundable portion
Allow for up to $10,000 of expenses paid for elementary and high school
as qualified expenses for a Section 529 Plan
Student loan debt discharged as a result of the student’s death or
disability would be non-taxable

30
Education Credits
Additional education incentives eliminated:
• Repeal student loan interest deduction
• Repeal tuition and fees deduction
• Eliminated the exclusion from income interest
on U.S. savings bonds
• Employer-provided education assistance
exclusion was also repealed

31
Changes to Tax Exempt Items
Gain on sale of personal residence
• Exclusion amount remains the same ($500,000 MFJ; $250,000 MFS)
• Years of ownership rule changed
 Previous rule: two of the last five years must have owned and used the
home as a personal residence
 New Rule: five of the last eight years must have owned and used the
home as a personal residence
• Can only be used once every five years
• Phased out for high-income individuals
Repeal the tax-free exclusion of dependent care assistance
programs, qualified moving expense reimbursement and
adoption assistance programs

32
Individual AMT
Alternative Minimum Tax (AMT)
• Originated in 1969 to target 155 people with high
incomes that were paying zero federal income taxes
• Over 5M people pay AMT today
Proposal
• Eliminate AMT

33
Estate Tax Changes
Currently
• Top rate of 40%
• Exemption of $5.45M per spouse
Proposal
• Double the exemption to $10 million
• Repeal the tax after December 31, 2023, while
maintaining the beneficiary’s ability to step-up the basis
of the estate property

34
Contact Information
34
Shawn Zalewski, CPA
Manager
szalewski@skodaminotti.com
440-605-7237
Jimmy A. Forbes, CPA
Partner
jforbes@skodaminotti.com
440-605-7156
CPE Code:
TTC

Generations in the Workplace
Laura Rohde
November 9, 2017

36
WELCOME!
Objectives
1. Describe the five generations in the workplace today
2. Analyze the similarities among generations
3. Examine strategies for multi-generational harmony in the workplace
4. Explore how to coach each unique individual

38
GENERATIONS
• Group of people born during same period of time/have same
approximate age.
• Assumed to have similar ideas, problems, attitudes, interests
and values.

39
TRADITIONALISTS 1922 – 1944
• Work hard/dedicated
• Loyal to company
• Honor and respect the rules
• Willing to sacrifice
• Demonstrate traditional work ethic
• Respect a chain of command/seniority
• Believe no news is good news/feedback not necessary

40
BABY BOOMERS 1945 – 1964
• Work hard/long hours
• Committed long-term to a company
• Work is life
• Respect a chain of command
• Need to know they are valued
• Communicate in person
• Feedback – once a year with lots of documentation

41
GENERATION X 1965 – 1980
• Want a work/life balance; Need flexible schedules
• Less emphasis on hierarchical structure
• Expect multiple employers or careers
• Autonomous
• Don’t necessarily stick to the rules but go their own way
• Moderately comfortable with technology/social media
• Feedback – wants direct feedback but does not like to
interrupt others to get it

42
MILLENNIALS 1981 – 1999
• Expect multiple employers or careers
• Need meaningful work
• Excel at integrating technology into the workplace
• Lifestyle is more important than work
• Outwardly focused on charity and community events
• Respect diversity
• Notable comfort with social media and less interaction in
person
• Feedback – demand immediate feedback and recognition

43
GENERATION Z After 2000
• Lifestyle more important than work
• Seek instant gratification through posts and “likes” on social
media
• Like small groups
• Mission driven
• Personal freedom
• Feedback – bite-sized feedback that is immediate / in real-
time

44
PREFERENCES IN GENERATIONS
“No news is good news.”
FEEDBACK

45
“I’m content with feedback
once a year with lots
of documentation.”
FEEDBACK

46
“Sorry to interrupt, but
how am I doing?”
FEEDBACK

47
“Will you please give me feedback
on the project that we just
finished five minutes ago”?
FEEDBACK

48
FEEDBACK
“I prefer feedback
whenever
I want and at the
push of a button.”

49
DISCUSSION QUESTIONS
• Describe one historical event that occurred
during your teenage/young adult years.
• What was some technology that you used in
high school or college?
• What challenges you about the other
generations? What benefits do you receive from
the other generations?

50
HISTORY REPEATS ITSELF
Years Era Generation Type Generation name
1901 – 1921 Unraveling Civic minded G.I. Generation
1922 – 1944 Crisis Adaptive Traditionalists
1945 – 1964 High Idealist Baby Boomers
1965 – 1980 Awakening Reactive Generation X
1981 – 1999 Unraveling Civic minded Millennials
After 2000 Crisis Adaptive Generation Z
After 2010 ? ? Alpha

51
SIMILAR!
WE ARE
• Possess values and common behaviors
• Want respect
• Need trustworthy leaders
• Resist change
• Want to learn
• Appreciate feedback

52
CONNECT?
HOW DO WE
1. Show respect
2. Be flexible
3. Avoid stereotyping –> they are descriptive but not defining
4. Learn from one another
5. Adjust communication style
6. Appreciate and value differences

53
UNIQUE INDIVIDUAL
COACH TO EACH
1.What motivates you?
2.What do you want out of work?
3.How do you want work organized?
4. How do you want to receive feedback?
5. What does work/life balance mean to you?

54
THANK YOU
Laura Rohde
Managing Director of HR Services
(440) 449-6800
lrohde@skodaminotti.com
CPE Code: GWP

Strong Controls Lead to
Strong Companies
Chrissy Walters, CPA, MBA
November 9, 2017

56
Agenda
• Risks, controls and internal audit (IA)
• Process documentation
• Risk and control identification
• Testing controls
• Remediating and implementing controls

57
Internal Audit Overview
We help our clients become stronger by improving controls
over their financial processes. We accomplish this through
process documentation, risk assessments and the
development of effective testing programs.
• Risks
• Controls
• Process Improvement

58
What Companies Need IA?
ALL COMPANIES BENEFIT FROM INTERNAL AUDIT!
Public Companies
 Required to be in compliance with Sarbanes-Oxley Act
 Need to have processes documented (always room for improvement)
 Workpapers may be relied on by external auditors
Private Companies
 Documented processes allow for better understanding and are a tool
to identify control gaps and suggest improvements
 Risk management – controls can prevent or detect risk
 Positions the company for growth or change

59
Why Do We Need
Process Documentation?
• Formalize the process to promote understanding of the
process
 New employees
 Auditors
 Potential buyer – better understanding of the business (less risky,
higher price)
• Assigns individual responsibilities within the process to
ensure accountability/buy-in
• Identify risks, controls or lack thereof
• Identify process improvements

60
Types of Process Documentation
Narratives: Paragraph Form
Flowcharts:

61
Let’s talk about the state of the narratives for your company
• Do you have documented processes?
• When were they last reviewed/updated?
• Do you have risks and controls identified?
Group Discussion

62
Improving Your Current Documentation

64
Risk-based Audit Approach
• First, identify the risks (lack of review, segregation of
duties issue, improper access, etc.)
• Develop controls to mitigate the risks
• Create a testing program to verify control effectiveness;
perform testing at least annually
• Discussion – what is an issue/risk in your company? Let’s
discuss control suggestions

65
Risks and Controls
Risk Control
Lack of review
Develop a review process by a proper second person and
document steps to follow.
Segregation of duties
issues
Incompatible tasks should be separated (adding new
vendors and cutting checks) or develop compensating
controls.
Improper access
Develop an access review process; new access must be
approved, old access must be taken away.
Revenue recognition
An invoice is not generated until confirmation is received that
the item was shipped. Cut off procedures in place.
Inventory theft Doors are locked and physical access is restricted.
Goods received does not
match goods purchased
Automated or manual three-way match of the purchase
order, invoice and bill of lading.

66
Testing Controls
• For controls currently in place
 Perform a test of one to verify the control is operating as intended
 Create remediation plans as needed
• For new controls
 Create a plan for the new control including people responsible,
control steps, and planned compliance timing
 Once the control is implemented, perform testing for “controls
currently in place” as noted above

67
Stronger Companies
The purpose of a control is to minimize risks and help
safeguard your assets
• Determine the right control for each risk
 More controls do not collectively equal a stronger company
 Determining the most effective and efficient control
• Don’t assume controls are operating effectively—test them!
• Revisit the IA process annually
 Update your process documentation
 Assess your risks and the corresponding controls
 Perform testing to determine if controls are operating effectively
A strong internal control structure will yield a stronger company

68
Contact
Chrissy Walters, CPA, MBA
Principal
(440) 605-7178
cwalters@skodaminotti.com
CPE Code: IAU

The Next Big Thing
Value Acceleration/Exit Planning
Mike Trabert, CPA, CVA, CMAP, CEPA, CM&AA
November 9, 2017

70
Agenda
• Market Perspective
• Value Acceleration Methodology
• Building Value
• Advisor of the Future

71
Mike Trabert
CPA, CVA, CMAP, CEPA, CM&AA
• Mike leads Skoda Minotti’s Value Acceleration/Exit Planning Group,
as well as the firm’s Transaction Advisory Services Group
• He is a Certified Valuation Analyst, Chartered Merger and
Acquisition Professional, a Certified Exit Planning Advisor and a
Certified Merger and Acquisition Advisor
• Mike graduated from Kent State University in three years where he
received his Bachelor of Business Administration degree in
Accounting
• Mike was recognized in the National Register’s Who’s Who in
Executives and Professionals
• He has been recognized as the Exit Planner of the Year by the Exit
Planning Institute
• He is Co-Chair of the Leading Edge Alliance Family Business
Special Interest Group
• He is a frequent speaker nationally and internationally
• Mike has attended a regular season Major League Baseball game in
over 60 venues
Skoda Minotti
Cleveland, Ohio
440-449-6800
mtrabert@skodaminotti.com

72
CHANGE THE
OUTCOME
FOR BUSINESS OWNERS

73
Historical Transition
Success Rates
• 70-80% of businesses put on the market don’t sell
• Only 30% of all family-owned businesses survive into the
second generation
• 12 months after selling, 75% of business owners
surveyed “profoundly regretted” the decision

74
A Tidal Wave of Exits is Coming
Sales Range
# of Co’s
(thousands)
%
Sales $
(trillions)
%
Micro Market <$5M 5,678 93.9% $3.57 12%
Lower Middle
Market
>$5M-$100M 351 5.8% $5.84 20%
Upper Mid
Market and
Above
>$100M 21 0.3% $20.33 68%
Total Employer
Firms
6,050 100% $29.74 100%

75
Within seven years, ALL
baby-boomers will be over
60 years old
Own 63% of the 6M private
businesses in U.S.
80-90% of their wealth is
tied up in their businesses
EPI research confirms: 48%
in the next five years; 76%
plan to transition over the
next 10 years
The Age
Wave
4,500,000
Businesses
$10 Trillion
in Wealth

76
Market Dynamics
• What impact do you think this will have on the market when
these business transitions begin to flow?
• Multiples are likely to fall
• Only the best businesses have the
option to sell

77
What Can You Do?
• Build a system that positions the business for a successful
transition in good times or bad
• Identify what they already have
• Initiate steps to mitigate risk
• Build value
• Position the business so that
they can unlock the wealth

78
How Prepared Are
Owners to Transition?
• 66% were not familiar with all exit options
• 78% had no formal transition team; 83% had no written
transition plan; 49% had done no planning at all
• Only 7% had a formal post-transition plan detailing what
they were going to do next
• 40% had no plans in place to cover the 5 Ds
• 56% felt they had a good idea of
what their business was worth, yet
only 18% had had a formal
valuation in the last two years

79
“Father time is
undefeated.
- LeBron James

80
Always Be Ready to Transition
• The 5 Ds
1. Death
2. Disability
3. Divorce
4. Disagreement
5. Distress
• Unsolicited offer to sell

81
Owner Paradigm Shift
From To
Future Present
Business Personal, Financial and Business
Income Value
Individuals Team
Project Process
Plans Actions
Tangible Assets Intangible Assets
Tax Number Real Number
Owner Stakeholders
VERSUS AND

82
LIFESTYLE
VALUE CREATION
90% are lifestyle
businesses

84
Why Focus on Value?
This business is 70% of the
owner’s net worth
assuming he/she can monetize

85
Three Keys to a
Successful Transition
“Three Legs of the Stool”
 Maximizing the value of the
business
 Ensuring you are personally
and financially prepared to
maximize net proceeds
 Ensuring you have a plan for
what you are going to do next
Integrate exit strategy
business practices into the
daily operations of the
business

86
Value Acceleration
A proven process that focuses on value growth and
aligning business, personal and financial goals
• Integrates the three legs into one Master Plan
• Is grounded in ACTION
• Promotes use of teams in an engaging process
• Creates a roadmap to success
• Provides owner key deliverables and metrics
• Creates a Leap in Value

87
Additional Benefits
• Focusing on value makes the timing of the exit irrelevant –
always “ready”
• Very predictable results
• Breaks big strategic programs into 90-day chunks (sprints!)
• Connects daily activities to value growth
• Acts as a driver of organizational behavior
• Mitigates risk
• Gets employees and management thinking more like owners –
what are the financial impacts of their performance?
• Ensures owner and family wealth are at the center of the plan
• Can be used as an inter-generational and employee
development, transition and measurement tool

88
Core Concepts
• 5 Stages of Value Maturity
• 4Cs
• 3 Legs of the Stool
• Relentless Execution

89
Value Maturity Index
5 Stages to
Identify, Protect,
Build, Harvest
and Manage
Value

91
Strategic Value = Simple Math
MULTIPLE
CASH
SALES
X =
You control You control some
Predictable Cash Flow
Clean Balance Sheet
Size Matters!
Private Capital Market Conditions
Terms / Exit Option
Intangibles (Value Factors)
Simple Math

92
What Is Intellectual Capital?
“…the sum of everything everybody
knows in a company that gives it a
competitive edge.”
– Thomas A. Stewart
The Wealth of Knowledge

93
Tangible Versus Intangible Assets
Can you measure
the value of your
intangible assets?
Traditional
accounting systems
are set up to
provided regular
feedback on tangible
assets…
…yet, your intangible
assets are the direct
drivers of business
attractiveness.

94
World’s Most Valued Companies
What do
these
companies
have in
common?

95
The 4Cs
Human
Capital
Structural
Capital
Customer
Capital
Social
Capital

96
Common Sense Scoring
1 532 4 6
STRONGWEAK AVERAGE
CAN INTELLECTUAL CAPITAL BE MEASURED?

97
Scoring Exercise
1 532 4 6
STRONGWEAK AVERAGE
1 532 4 6
1 532 4 6
1 532 4 6
Human
Customer
Structural
Social

98
Focusing and
Sustaining Improvements
“We have this list to build value. And we know what
value enhancement is worth…so now what?”
“5 Business and 5 personal
actions that we can complete in
the next 90 days, every 90 days.”
Keep Score!

99
Myth vs. Reality
About Exit Planning
• Myth: Exit planning is something owners do when they are
ready to leave the business
• Reality: Exit Planning is Business Strategy. It’s about
building a management system to keep the organization
focused on building value that “one day” can be extracted,
harvested and monetized from the business
VALUE is all about transferability
Focusing on VALUE produces all other positive outcomes

100
Exit Planning Institute
• Teaches Value Acceleration Methodology
• Certified Exit Planner Advisor (CEPA) – Value Advisor
• 600 CEPAs in 13 countries
• 20 chapters

101
Communicating with the Owner
Advisors:
Left Brain
Owners:
Right Brain
Info processing
Process info in a linear
manner
Process info holistically
Project engagement Identify important details See end result with clarity
Perception Analytical Creative
Workflow Move in a sequential order
Move randomly from task
to task
Problem solving
Use logic to solve
problems
Use intuition to solve
problems

102
The Advisor of the Future
• Holistic approach and whole brain thinking
• Embraces multi-generational needs
• Has ‘purpose’
• Educates on all options
• Integrates three legs
• Grounded in action
• Quarterbacks the team
• Advisor collaboration

103
Summary
• It takes time to get ready; starting is difficult
• Readiness correlates to value
• This is a once-in-a-lifetime event

104
Contact
Mike Trabert
CPA, CVA, CMAP, CEPA, CM&AA
Partner
(440) 449-6800
mtrabert@skodaminotti.com
CPE Code: VEP

Ethics & Professional
Responsibilities
Update Course
Ryan Siebel, CPA
November 9, 2017

106
= flag for something particularly new this year.
= of particular interest to a CPA in industry.
Learning Objectives
• What we want to accomplish today:
• VERY brief overview of professional responsibilities
• What is new for 2017 from the Accountancy Board of Ohio
(ABO) and the AICPA
• Tax Services

107
Source of Ethics Rules
• Ohio Administrative Code
• AICPA Code of Professional Conduct
 Public practice
 Private practice

108
Performing Public Accounting
• Defined in OAC 4701-7

109
Performing Public Accounting
• Ethics apply when you “practice” public accounting. This
means any performance of an engagement where you
issue any of these “attest” reports:
 Audit
 Review
 Compilation
 Examination
 Agreed-upon procedures
• It also includes other services covered by professional
standards (e.g., write-up work)
• It also includes offering services (e.g., consultations, tax
advice) when advertised to the public as a “public
accountant”

110
* This is where “subordination of judgment” comes in.
Integrity and Objectivity
• An Ohio permit holder “shall not knowingly misrepresent facts,”…
… and, while engaged in public accounting shall…
 Be free of any conflict of interest
 Not subordinate to others any professional judgment *
 Maintain integrity and objectivity
[OAC 4701-9-01] OAC

111
General Standards
Public CPAs
• Only undertake engagements that you have professional
competency to complete.
• Failure to:
 Exercise due professional care.
 Adequately plan and supervise.
 Obtain sufficient relevant evidence.
In short, the CPA must follow GAAP and GAAS (or
the relevant set of standards).

112
Tax and Consulting
• Tax return preparers, signers or recommenders
 Follow “Statements on Standards for Tax Services”
• Consulting engagements
 “Statements on Standards for Consulting Services” and
“Statements on Standards for Valuation Services”

113
CPE Requirements
• It is basically 120 hours during a three-year reporting period (40 hours
per year). You must have at least 20 of the 120 hours in each year –
can’t wait until the third year for all of it.
 Fine of $10 for every CPE credit deficient below 20 requirement
• Live study – 50-minute period equals one credit, 1/5 for each 10
minutes thereafter. 300 minutes (excluding breaks) = eight credits.
• Self-study – 10-minute increments
• The CPA maintains his/her own evidence until end of next reporting
period.
• Self-study does not count, unless there is a test.
• The Board can exempt/extend things for cause – don’t “fudge” things.

114
Service Line CPE
• If you perform audit or attest work, you need 24 hours of A&A material.
• If you perform tax work on an engagement, prepare a tax return, or
sign a tax return, you need 24 hours of tax training.
• CPAs need three hours in ethics over the three-year reporting period.
• Auditors working on governmental audits (including “A-133” audits)
have special rules and additional requirements. Mostly it is 24 hours
“yellow book” training and 80 hours of general CPE every TWO years.
 New staff can be on a program to comply and still work on a client.

115
Client Records*
• Under OAC rule 4701-11-06, the CPA must provide
“client records” upon request, within 30 days.
 Client records include any original documents and also adjusting
entries and depreciation schedules (things which would otherwise
make a client’s financial information incomplete).
 If already in an electronic format, the CPA must provide it
electronically, if all fees have been paid.
 If fees are unpaid, the CPA need not provide the electronic
version. But they still get a paper printout in 30 days, even if fees
billed are unpaid.
 Client gets only “one bite” at the apple.
(#1 area of ABO complaints)
* ABO differs from AICPA.
OAC

116
Code of Professional Conduct
(“CPC”)
The Codification
• Similar to the creation of FASB’s ASC codification of GAAP, this takes
the entire body of professional ethics standards and creates a
consistent style and reference numbers. The first section is rules for
firms and CPAs in public practice, followed by rules for members in
industry.

117
Code of Professional Conduct
(“CPC”)
• CONDUCT (“CPC”)

118
Subrogation in Public Practice
(aka disputes among professionals)
• The CPC clarifies through examples that a CPA member in
public practice must “apply safeguards” – i.e., research
and consult with higher ups – if there is a dispute with the
immediate supervisor.
 Issues that are not material are not significant to one’s ethics.
 Issues that are material are thus significant and must be addressed
through existing QC processes. The CPA could ultimately conclude
that if no appropriate action is taken, he or she must consider
whether to continue in employment.
 Even resignation might not relieve a member from a duty to
disclose matters to regulatory authorities (i.e., see a lawyer).

119
Discreditable Acts
CPAs in the Industry
• Discrimination or harassment
• Negligence in preparation of financial statements or
records
• Failing to file a tax return or remit taxes collected
• Deceptive or false marketing activities
If we become aware of the resignation of a client CPA executive, it is
usually appropriate to attempt to inquire of the facts surrounding
the resignation.

120
Confidentiality
• Confidentiality is required, except when:
 Client consents – e.g., due diligence for an M&A project
 Peer review or PCAOB inspection
 A subpoena is issued
 A trial board complaint is initiated or responded to

121
Contingent Fees
A CPA shall not:
• Practice public accounting for a contingent fee, whether it
is for the attest work or any other service.
• Prepare an original or amended tax return (or provide tax
consulting) for a contingent fee.
An example would be providing investment banking or
finders fee services where we receive a payment upon
completion of a debt or equity financing for an attest client.

122
Risk-based Independence Concepts
• Defines independence, impairment, threats and
safeguards
• There are seven listed threats to independence:
 Self-review – auditing your own work
 Advocacy – representing a tax client in court
 Adverse interest – either party suing the other
 Familiarity – spouse, long association, recent employment
 Undue influence – fee pressure, gifts
 Self-interest – joint ventures, loans, contingent fees, etc.
 Management participation – e.g., HR functions
• The threats are overcome by safeguards

123
Examples of Safeguards
• Continuing education, such as this presentation
• Internal QC and external peer review
 Annual independence circularization
 Consultations (internal or external)
 Acceptance / retention policies
 “cold review” processes
• Tone at the top – e.g., mission statement
• Rotation of senior personnel
• Compensation policies
• Policies that might exist within client organizations

124
Conflict of Interest
• The CPC uses the “threats” and “safeguards” approach in
order to evaluate conflicts of interest.
• A member may conclude doing a particular service is okay,
if it can be done with objectivity. There are several
examples in the CPC [see next slide].
• You would still then disclose it and obtain consent from
other parties, such as company management or an audit
committee, even if you conclude it is okay.

125
Examples of Conflicts of Interest
• Valuation of assets for two clients (e.g., a divorce) who are
in an adversarial position with respect to the assets
• Both sides of an M&A transaction, or competing bidders
• Advising a client to purchase a product or service while
having a relationship with that vendor
• Providing tax or personal financial planning to family
members known to have opposing interests
Would a reasonable and informed third party who is aware of the relevant
information conclude that a conflict of interest exists?

126
Valuation Services
• Prohibited for attest clients if the results would be material
to the financial statements and are, in fact, for financial
statement purposes.
• You can perform valuation services for non-financial
statement purposes if it does not result in an entry on the
books of the company (e.g., tax planning, estate planning,
divorce proceedings)
• You can provide a “standard template” (e.g., Black-Sholes;
subject to only minor judgment or interpretation).

127
Forensic Accounting
Forensic Accounting Services
• Litigation consulting services for clients
are okay.
• Fact witness testimony is okay.
• “Attorney privileged result” services
would be prohibited, as they can’t be
shared with the audit team.
• Arbitration or expert witness testimony
for attest clients is prohibited (client
advocacy). This could include forensic
accounting services.

128
Investments in Clients
• A “Covered Member” can’t have any direct financial
interest in an attest client.
 Covered Member = anyone on the attest team*
= partner/principal in the office
= P/P/M > 10 hours of
non-attest work
• A covered member can’t have a material indirect financial
interest in an attest client.
• If from another office, a partner or employee (or their
family) or even a group of such can’t hold > 5 percent.
* Or an individual in a position who could influence the attest team

129
Employment
• Immediate Family = spouse or dependent (whether or not
related)
• Close Relative = parent, sibling or non-dependent child
• Can’t provide attest services if immediate family or close
relative held a “key position”
 e.g., CEO, CFO, controller = accounting functions
 There are some exceptions

130
Breach of Independence
• If a breach of independence occurs, resignation from the
attest engagement may not be the only course of action.
• Firms evaluate the significance of the breach and the
ability to continue to serve, within the context of threats
and safeguards, as well as communicate with those
charged with governance.
• Actions short of resignation might include change in team
members, or re-performance of affected attest work.

131
What’s New in 2017
• Knowing Misrepresentations in the Preparation and
Presentation of Information
 Bookkeeping and other financial statement preparation services
 Concept of employing organization
 Decide whether the relationship can be continued
• Pressure to Breach the Rules
 Uses threats and safeguards framework to evaluate pressures
• Hosting Services
 Effective 9/1/18

132
AICPA Statement on
Standards for Tax Services
• “Tax return position” = any issue in the return that the CPA
is specifically aware of.
• The basic rule is there must be a “realistic possibility” of
the position being sustained.
• You even can do something less than this standard so
long as:
 It is disclosed in the tax return, and
 It is not frivolous.
• IRS Circular 230 has
similar requirements.

133
IRS Circular 230 Practitioner Duties
• Exercise due diligence (failure to do so = something more
than just a simple error, e.g., frivolous positions)
• No unreasonable delay
• No contingent fees or “unconscionable” fees
• No conflicting interests without consent
• No false or misleading opinions (even verbal)
• Use reasonable efforts to comply with tax law
• No false or misleading advertising or solicitation

134
IRS Circular 230 Required Actions
• Sign tax returns that you
have prepared
• Return records to the client
• Provide a copy of the tax
return to the client
• Disclose on return all non-
frivolous tax positions
whose disclosure is
required to avoid penalties

135
Circular 230 Charges
• In June 2014, the IRS approved changes regarding
“covered opinions” which relate to written advice by a
practitioner concerning listed transactions and other tax
avoidance/evasion transactions.
• The rule changes:
1. Strengthen the rules regarding other written advice.
2. Eliminate the need to fully describe relevant facts and the
application of law to the facts in the written advice.
3. Eliminate the use of Circular 230 disclosures in documents and
email transmissions.

136
IRS Office of
Professional Responsibility
• OPR’s mission is to increase awareness and
understanding of Circular 230 requirements.
• It is the IRS group to which potential penalties or other
investigations of tax practitioners are referred.
• Fundamentally Cir 230 § 10.21 say if we know that a client
has not complied with laws, or made an error or omission
in anything, we must promptly advise the client of the fact
and consequences provided in the code/regs.
• Many of the same conflict of interest concepts in the CPC
are now also contained in Cir 230 § 10.29.

137
IRS OPR Continued
• Persons with authority and responsibility for a firm’s tax
practice must make reasonable steps to ensure adequate
procedures are in effect.
 This normally includes the use of checklists (or some system for
promoting accuracy) and internal reviews.
 Off-the-cuff advise or emails may result in penalties or sanctions.
Remember, no email ever goes away…
• OPR actions or even simple inquiries against a CPA may
result in notification to the state accountancy board.

138
Court Proceedings on Preparers
• The IRS has been trying to regulate tax preparers,
including having annual CPE and competency tests. A
February 2014 appeals court decision halted this IRS
initiative, which would have been effective starting in 2015.
• Another November 2014 district court decision rejected an
AICPA attempt to permanently quash the program.
• September 2015 bipartisan legislation has reintroduced
the issue.
• Trump proposal to increase oversight of paid tax return
preparers

139
Contact
Ryan Siebel, CPA
Partner
(440) 449-6800
rsiebel@skodaminotti.com
CPE Code: ETU

The CFO’s Expanding Role
How CFOs Are Driving Strategy
November 9, 2017

141
Agenda
• The new role of the CFO
• Shifting from a functional to a strategic orientation
• The new strategy model
• Key threats to the CFO and the finance
organization
• What’s next for the CFO

142
The Message
(CFOs) shape business strategy
through a deep understanding of
financial drivers, and seek
opportunities for long-term success.
The Changing Role of the CFO: IMA & ACCA: Page 2

144
Basic Organization Chart
President / CEO
Chief Customer
Officer
Marketing Sales
Customer Service
Chief Operations
Officer
Manufacturing /
Production
Technical Support
Chief Financial
Officer
Finance
Human
Resources
Information
Technology
Purchasing

145
Leadership Team Shifting Roles
President / CEO
Chief Operations
Officer
Chief Financial
Officer
• In some cases President /
CEO is blending and
blurring with the COO
• Decline in the COO role
• CFO is being elevated to be
a close confidant of the
CEO
• CFO reports directly to
President / CEO and board
• CFO is shifting from the
cost control role to a
strategic player role

147
Areas of Concern
Regulations
Financial
Management
Risk Reporting
Talent &
Capability
Technology
Information
Technology
Data &
Analytics
Real Estate
Strategy
Trans-
formation
Stakeholder
Management
Portfolio
Management
Procurement
Investments
Global
Markets
Cybersecurity
M&A

148
A Case Study
http://marketplace-images.trainzauctions.com

Hard Skills
• Finance / Accounting
• IT / Technology
• Human Resources
• Investment
• Risk
• Global Focus
• Analytics / Big Data
Soft Skills
• Management
• Owner / Investor Relations
• Risk Management
• Portfolio Management
• Talent Management
• M&A: Leadership & Integration
• Organizational Leadership
• Vision
• Communications
• Engagement
• Cultural Alignment
Skill Sets Required

150
Role of the CFO in Strategy
• Roughly one-third of respondents play
a major role in strategy development.
• They are significantly more likely to
have a strong relationship with the CEO
and other C-level colleagues.
• They are more likely to measure their
own performance on improvement to
the organization’s financial metrics.
• There is no distinct relationship
between the strategy developers and
the size of the organization.
• They tend to be slightly older and more
broadly educated but are less likely to
be chartered accountants or Ph.Ds.
The DNA of the CFO: http://www.ey.com/gl/en/issues/managing-finance/the-dna-of-the-cfo---the-cfos-contribution-to-strategy
Areas where EY CFO survey respondents
believe they play a leading role in corporate
strategy (percentage)

151
The Accelerated Continuous
Strategy, Plan, Execute Cycle
Foresigh
t
Insight
Strateg
y
Plan
Execute
Measur
e
Foresight
/Insight
Strategy
Plan
Pilot
Execute
Measure
• Strategy requires a 12-18 month
payback
• Market, competition and
technology evolving very fast
• Product and service life cycles
have shortened considerably
• Implement a portfolio approach
• Pilot test, pilot test, pilot test
• Challenges with organization
adoption and burnout from
moving too fast

152
Large Company
CEO Tenure is Short

153
CFO Change Skills
Communications
• Master story
teller
• Address WIIFM
• Keep it brief
Project
Management
• Delegate
• Create
accountability
• Build buy-in
• Anticipate issues
Change
Management
• Sponsorship /
leadership
• Engagement
• Training
• Business case

154
Digital Impact on CFOs
Nearly Half of Chief Financial Officers Believe Digital Technologies Will Fundamentally Change Everything Finance Does, According to Accenture Strategy,
March 08, 2017

155
1st IR 2nd IR 3rd IR 4th IR
1700 – 1800s 1870 - 1914 1980s - ? Now
Iron
Textiles
Steel
Oil
Electricity
Digital
Technologies
Robotics
Nanotechnology
Biotechnology
Steam
Engine
Telephone
Light Bulb
Phonograph
Personal Computer
Internet
Communications
Artificial Intelligence
Internet of Things
3D Printing
Industrial Revolutions

156
Industry 4.0 / Smart Manufacturing
Source: Deloitte, Skoda Minotti
Monitoring and Issue
Detection
Sustainable
Manufacturing
Smart Distribution
Ecosystem
Other

157
Advanced Analytics
and Visualization
Graphic courtesy of Microsoft corporation

158
Advanced Analytics
and Visualization

159
Artificial Intelligence Speak

160
What’s Next for the CFO?
• More, more, more
– More responsibility
– More skills
– More influence
– More ….
• However, it’s not always a given that this will
come to every CFO!

161
Q1:
What are the key barriers in your organization
to you moving forward?

162
Q2:
What are the internal and external resources
you can draw on?

163
Q3:
What skills do you need to develop?

164
Q4:
What external threats do you see that will
cause you to move?

165
Q5:
What should you do to get started?

166
What Can You Do First?
• Reduce costs
• Build a strong relationship with your president / CEO
• Develop a clear plan to develop new skills and repeat
• Adopt business analytics
• Tune staff
• Innovate
• Cultivate an ecosystem
• And REPEAT
Remember this is a journey, not a destination!

Skoda Minotti CPE Day - 2017 (Part 1)

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