Selecting a Certified Public Accountant (CPA) WHAT SERVICES DO CPA S OFFER? CPA s act as advisors on a wide range of financial and management matters. Selecting an accountant is a decision that has far-reaching consequences for your organization. You must decide what role you want the selected CPA firm to play in your organization. Managers of not-for-profit organizations have traditionally depended on CPA s for auditing services and advice on developing effective accounting systems, streamlining reporting methods, and resolving various management problems. In addition, CPA s assist not-for-profits in designing and installing date processing and management information systems. Before selecting an accountant, you should determine the services you will need. Be prepared to discuss your plans and objectives when you meet with the CPA or accountant. Explain what you expect from the CPA or accountant. Here are just a few of the services a CPA may be able to offer you: Analyzing operating results Providing management consulting services on such subjects as data processing systems Developing budgets and forecasts Preparing tax returns and governmental reports Auditing, reviewing, or compiling financial statements Assessing benefit and compensation plans Setting up accounting systems Assisting in the preparation of responses to RFP s Determine the answer to these questions: What type of audit do your funding sources require? Will you need help with financial statements? Will your organization require an audit or review? Do you require accounting, auditing, tax advice, or management consulting? What are the requirements for special reports to government agencies? Do you need help in instituting accounting controls and systems? HOW DO I FIND A CPA THAT IS RIGHT FOR US? References Referral is probably the most reliable way to find an accountant that can meet your needs. Talk to professional associates, governmental representatives or anyone whose opinion you value who might be associated with an organization such as your own. Find out who they have employed and if their experiences with such professionals have been satisfactory. Your attorney may be 1
able to refer an accountant to you because attorneys often work with the accountants of their clientele, they can often be a valuable source in referring others within the professions with different specialties. Often members of your board of directors can refer a reliable professional to you. If you did not first learn about the CPA from a referral, you might want to ask for a list of references. Take a few moments to contact current clients to gauge their level of satisfaction. Experience & Education Expertise is perhaps the most obvious of considerations. Be sure that your professional is experienced and an expert in the area that you seek to use his/her services. Today many professionals are confronted with highly technical issues in so many areas that specialization has become a necessity. Do not assume that your professional is well versed within your special area of concern. Ask your professional; ask your referral source. How many years has the CPA been practicing? Where did the CPA attend college? When did he/she graduate? What degree was conferred? Any graduate-level education? Although all CPAs must pass and intense four-part exam before becoming a certified public accountant, regardless of schooling, it still may be useful for you to learn more about the educational background. It has become very important for an accounting professional to be computer proficient and knowledgeable in software and computer resources in order to provide clients with the type of support services that are now needed to be successful whether you are in a commercial or nonprofit environment. This is especially important for nonprofits, as a thorough understanding of fund accounting software is vital. Check this knowledge. A college education and passing the CPA exam are only the beginning steps in an accountant s career. What additional training has the CPA undergone? In what areas? Most states require that CPA s undergo regular continuing professional education (CPE) in order to retain a license. How many hours of CPE credit has the CPA earned during the year? What classes does he/she attend to receive the continuing education? What did he or she do before becoming a CPA? Whether you would prefer to select someone just out or college, or one who has 25 years of experience, you must be comfortable with the level of experience in the CPA you select. Professional Affiliations and Designations CPA s are required to engage in professional continuing education to retain their certification. Without doing so, they become ineligible for membership in the American Institute of Certified Public Accountants, the professional organization of the profession. Additional designations may include CFM (Certified Financial Manager), CFE (Certified Fraud Examiner), CMA (Certified Management Accountant), and CIA (Certified Internal Auditor). Size of Firm There is no perfect size firm in the accounting industry. You may feel more comfortable working with a sole or local practitioner, or you may prefer a statewide or national accounting 2
firm with offices around the world and thousands of CPA s on staff. Try to interview CPA s in different size firms, and make the choice best for you. Resources No two clients are alike, and specific questions are bound to develop as the CPA handles your financial matters, including issues that may require legal or personal consultation. What resources are available to the CPA when he/she has questions which need to be researched? To whom does he/she turn for advice? Area of Concentration Depending upon your needs, you may want to select a CPA who concentrates his/her practice in a particular area, like nonprofits or entrepreneurial ventures. Does the CPA concentrate his/her practice in any particular area? What percentage of his/her business is in that area? How does he/she stay abreast of trends and developments in that industry? Accessibility Make sure that your professional is accessible. You should ask whether he/she can attend to your matter without delay. In addition, it is important to know if your professional will be available to you on a daily basis should you have any questions or information. Will your calls be returned within a reasonable period of time? Professional Reliability and Turnover You want as much consistency, year after year, that you can get in terms of the CPA s who are working with you. Changes of personalities who come to audit you, means costly learning curves and unexpected changes in approaches. As a nonprofit, you also do not want to get the newest employee all the time. Check out and demand consistency in who provides the professional service. Professional and Community Involvement What professional associations does he/she belong to? Why? Is he/she involved in any leadership capacity in the association(s)? Is he/she involved in the community? In what way? These questions will be more important to some organiztaions than others, but they will elicit helpful information you might use in making your selection. Compatibility All CPA s must meet rigid professional standards in order to maintain their license, and the accounting industry as a whole adheres to a strong ethical code. But as no two clients are alike, not all CPA s are exactly alike. After you have learned about experience, education, etc., take the time to learn about the person you will be trusting with your financial matters. Subjective as this may sound, pay attention to your instinct. Compatibility may at first not seem to be important, however, it is often the key to any working relationship. Compatibility refers to personality, general demeanor, listening skills, approach, and the existence of concerted goals. 3
Your comfort level should be equivalent to that felt with a good teacher or physician. One can often determine compatibility through a discussion (consultation) with the professional. A good CPA professional does not make you feel inadequate but reflects a respect for your professional knowledge in your field and an ability to complement your knowledge with his leading to a successful collaboration of effort. Fee & Engagement Although some prospective clients may be hesitant to ask questions about pricing, any responsible CPA will welcome an opportunity during the selection process to explain the billing fees and procedures. The first year of a new auditor is usually the most expensive because of the learning curve. Many will give multiple year engagements, at a better price than one year. Will the work be charged on an hourly basis? If so, at what rate? What if a support-staff person performs work? Will that be billed at a different rate? How frequent is the billing? Fees depend on the type of services you require, prevailing costs and the complexity of your work. Keeping good records will save you fees by not using professional time for routine work such as gathering results. Find out how much you will pay to have work performed by a staff accountant who is under the supervision of a CPA or accountant or by higher level employees such as a supervisor, manager or partner. CPA s and organizations often sign an engagement letter in advance of the work performed to avoid misunderstandings. The engagement letter describes the services to be rendered, fee ranges and other terms of the engagement. Get one. PREPARING A RFP FOR A CPA The purpose of a Request For Proposals is to acquire enough basic information from an auditing firm to adequately screen candidates for a second level review. The second level review would consist of an interview on your site. At the interview, you will provide full disclosure in respect to presenting your audit and discussing your accounting systems and needs. What you say about your organization in the RFP organizational profile, including mission, corporate status { i.e. 501(c) 3}, types of services, budget size and budget growth over last three years, overall assets (i.e. property value), age, fiscal year, and types of funding sources (including whether you need an A-133 federal audit). You may wish to include an annual report. Executive director, contact person (if different than ED) Indicate whether the board has an audit committee that will be involved with the firm Indicate whether an audit has been performed in the previous year State whether your books are automated or not, and if so, in what accounting software What you say about your expectations: Timeframe when audit is to be conducted and completed Indicate expectation that a preliminary audit (draft) is to be presented live to the organization, before a final is completed Seeking three year engagement 4
Looking for consistency over time in the individual CPA s who are conducting the audit Want ongoing consultation throughout year on matters that relate to your audit and internal control procedures Reasonable cost; preferably guaranteed What you want them to provide in the mail back to you: Background and details of their firm Experience with nonprofits in your area, particularly those of similar size and mission Hourly rate structure, including whether they provide a nonprofit discount References 5