CPA.com Blog

Kalil Merhib

VP, Sales

Reality Star Defrauds Multiple Banks Using False Financial Information

A case involving five banks duped into issuing loans totaling $1.4 million is again highlighting the need for more control and security around private company financial document exchange.

Michael Barrick, an antiques collector, trader and museum operator popularly known as Kentuckyana Jones, pleaded guilty to five counts of bank fraud after forging financial statements to establish the sales of multiple properties, a fraud that stretched over the course of five years.

Barrick had previously gained fame appearing on numerous reality shows, including Storage Wars and Barry’d Treasure, but he is now likely facing a lengthy sentence as each count of bank fraud carries a maximum penalty of thirty years in prison.

According to the plea agreement, schemes identified by prosecutors involved Barrick recruiting associates to purchase business property using falsified documents that substantially inflated assets and income to lenders.

Whenever a loan was in danger of going into default, he would repeat the process, creating further fake documentation to acquire new loans to pay off previous ones.

In one instance, a business partner was recruited by Barrick to obtain a loan in order to buy a wholesale mattress business. The only problem – a McDonalds restaurant was actually located at the address where the purported business was stated.

Once Barrick was eventually unable to pay back any of the borrowed money, these acts finally caught up with him.

The fact that this pattern went undetected on multiple occasions over the course of many years shows how susceptible third-party lending institutions can be to fraud.

That’s why a secure online platform for the exchange of private company financial information, is such a vital need for the accounting profession, their business clients and third-party users. In this case, had the financial institutions required that the financial statements be submitted through a secure platform that verified the financial statements were provided by a valid CPA firm, and that the documents were authentic and unaltered, Barrick would not have been able to get away with such rampant fraud.

To learn how RIVIO Clearinghouse can protect CPA firms, their business clients and third-party users from fraudulent financial document exchange, visit rivio.com.

Follow @rivio_ch on Twitter to stay up to date on important news regarding fraud prevention and the future of auditing and accounting.

Michael Trabold

Director, Compliance Risk, Paychex

What Your Clients Need to Know About 2019’s Top Regulatory Issues

This year, a new class of legislators are making their mark in federal, state, and local governments, progressing legislation on new and existing issues at all levels. It’s imperative for you to help your business owner clients understand current and pending regulations so they can avoid the costly consequences of falling out of compliance. Some of the top issues to keep on your firm’s and your clients’ radar for 2019 are:

  • Sexual harassment prevention. The #MeToo movement resulted in an increase in workplace sexual harassment prevention enforcement and legislation across the country in 2018 and is expected to continue in 2019. The Equal Employment Opportunity Commission reported significantly increased activity around sexual discrimination during the past fiscal year, launching 50 percent more sexual harassment lawsuits than the previous year. State and city legislatures, including California, New York State, Delaware, and New York City, responded with the passage of new legislation and regulations including provisions to implement or expand workplace sexual harassment prevention training requirements.
  • Paid sick leave and paid family leave. Currently, more than 40 state and local jurisdictions have implemented paid leave laws and several more are scheduled to implement leave policies in 2019. Although paid sick leave laws are more prevalent, paid family leave laws are generally more onerous for employers. Many family leave laws are funded by employee and/or employer contributions and might also require the periodic reporting of several elements including payroll deductions, employee hours worked, and employee wages.
  • IRS Enforcement of Employer Shared Responsibility (ESR). The IRS is continuing its ESR enforcement efforts, sending out 226J letters to employers it believes may not have offered required coverage to full-time employees and their dependent children with the preliminary calculations for ESR payments. Applicable large employers should ensure they complete the returns accurately, as the process of responding to 226J letters and follow-up IRS correspondence is time-consuming and onerous, requiring review of complex data gathered across multiple departments including payroll, human resources, and benefits.
  • Form W-4 Changes. Due to the 2017 tax reform law, extensive changes are required to the Form W-4. But due to the complexity of these changes, the release has been pushed back another year and the 2019 W-4 is similar to the current 2018 version. Many state tax agencies are waiting on the IRS to release the federal W-4 to determine if they will modify their withholding processes based on the federal changes.
  • Federal support for retirement savings. In August 2018, President Trump issued an executive order directing the Departments of Labor and Treasury to propose regulations that ease the burdens small businesses face in offering retirement savings plans. Prospects for successful new legislation, which will include components of prior proposals, are promising, potentially enhanced by Rep. Richard Neal (D-MA) as Chairman of the House Ways & Means Committee, who intends to make retirement legislation a priority.
  • Privacy. As Americans become increasingly focused on how well the companies they deal with protect their sensitive data, many states are enacting or broadening privacy regulations, with California’s new rule effective next year perhaps the most prominent. In addition to the usual requirements for a strong data security process, some states are requiring that consumers have the right to know what data companies are collecting on them and the ability to opt-out of that data being sold or distributed without their consent. Many business groups are calling for a federal privacy regulatory standard to avoid the need for alignment with differing state requirements.

It can be challenging for your small business clients to keep up with the constantly evolving regulatory landscape as they prioritize day-to-day operations and business growth. Armed with a knowledge of regulation and an understanding of the unique needs of your clients’ businesses, you can provide them with the information and resources they need to maintain compliance on all of the top regulatory issues this year.

Mike Trabold is director of compliance risk for Paychex, Inc. Paychex is a leading provider of human capital management solutions for small- to medium-sized businesses.

Matt Towers

Product Marketing Manager

Ensuring Success: Strategies to Improve PCR Engagements

Working on preparation, compilation and review (PCR) engagements can be challenging and time-intensive, pushing firms to overwork engagements and leaving them with limited time for higher-value advisory services for their clients. Back in December at Ensuring Success 2018, we discussed strategies to address these challenges and how technology can improve the quality of engagements.

Here are the highlights from that discussion:

  • Traditional Approach to PCR Services: Today many firms rely on manual processes for doing their PCR engagements. They use analog methods to collect and organize information, spend extra time determining the right checklists or procedures to apply and use dated communication practices with clients.
  • Challenges Experienced in PCR Services: The manual approach to PCR engagements can cause complex challenges for firms and their clients. The top challenges include:
    • A disconnected process
    • Inefficient and confusing communication practices that leave parties without an effective way to collaborate
    • Overworked engagements or the “more is better” approach driven out of fear of not complying with standards and failing peer review

    Ultimately this all takes up too much time and leaves firms with limited time for value added services.

  • Technology as the Solution: Emerging technologies like cloud technology, artificial intelligence and digitized data are transforming the accounting profession, the audit and assurances practices included. OnPoint PCR is a prime example of this convergence. OnPoint PCR uses cloud technology that integrates AICPA content and methodology to keep engagements up-to-date and offers intelligent guidance that eliminate unnecessary steps, enabling firms to enhance engagement quality and efficiency.

Watch our entire Ensuring Success 2018 discussions, Leveraging Technology to Improve PCR Engagements and Overcoming the Challenges of Peer Review in PCR Engagements, to hear the discussion about the challenges firms face with the traditional approach to PCR services and how technology can help automate and simplify the process.

Matt Towers
Product Marketing Manager, CPA.com
Matt has over 18 years of experience working in the tax & accounting technology industry with a specific focus in accounting & auditing technology and process. Having worked with thousands of accounting firms over the years to help them understand how to interweave relevant technology and business process, Matt has a keen understanding of the challenges and opportunities facing the profession today. Matt has been a featured speaker at thought leadership events and has been published in A&A publications writing on trends in the profession and the impact of technology and is responsible for managing the CPA.com assurance product line.

Kalil Merhib

VP, Sales

Could Recent $1.2 Million Church Fraud Have Been Prevented?

A church administrator in southwestern Pennsylvania allegedly skimmed more than $1.2 million in funds from his employer over the past seven years, in part by creating fake auditor reports to hoodwink the church’s board of trustees. That kind of fraud could have been prevented if the church or its financial institutions used RIVIO Clearinghouse, a secure online exchange for private company financial information, jointly developed by CPA.com and Confirmation.

David Reiter, 50, had been employed by Westminster Presbyterian Church in Upper St. Clair, Pa., for 17 years, a job that paid $69,000 in 2018. Yet the Allegheny County (Pa.) District Attorney's office calculates that Reiter and his wife, Connie, managed to steal $1,227,423 from church accounts – including the organization’s nursery school and child care programs – from 2011 to late 2018. Those spoils allegedly paid for trips to Walt Disney World and Hershey Park, Pittsburgh Pirates tickets, music lessons for the Reiters’ children, medical expenses, and a host of other items ranging from Starbucks visits to Sirius XM radio fees, the district attorney’s office contends.

The alleged scheme unraveled when the church board’s treasurer grew impatient with David Reiter when a face-to-face meeting kept being delayed with the church auditor, identified by Reiter as “Drew Harrison” of the Pittsburgh accounting firm Sisterson & Co. The treasurer called the firm and was told no one by that name worked there.

Reiter instead offered a cell phone number to contact the auditor, according to the district attorney’s office. But it was for a prepaid phone paid out of the skimmed funds, and Reiter impersonated “Harrison” on a subsequent call with the treasurer. With questions mounting, Reiter confessed to the church’s head pastor that he had done “bad things” and needed to resign.

Investigators later discovered the church had never been a client of Sisterson, and that Reiter had fabricated an audit report from the firm, as well as an earlier audit report from another firm that hadn’t been involved with the church for years.

In this case, a fake audit report was created, appearing to be issued by a real, licensed CPA firm, however the church had never been a client of this firm. Let’s explore how this could have been prevented with RIVIO Clearinghouse:

  • Audit reports exchanged through the platform can only be issued from licensed CPA firms that are appropriately following the stringent professional requirements to upload attested financial information.
  • Documents submitted through the platform cannot be altered, ensuring that information is authentic.
  • If RIVIO had been in use by the church or its financial institutions, the administrator wouldn’t have been able to pass off bogus auditor reports as legitimate.

Unfortunately, it can be too easy for bad actors to manipulate information. The good news is that there are steps you can take to help protect your clients and your firm.

You can read more about this case here - https://www.thisisinsider.com/david-reiter-allegedly-stole-money-from-westminster-presbyterian-church-2019-2

Learn about another fraud case very similar to this one, involving the former owner of Newsweek. https://www.cpa.com/webinars/scheme-defraud-first-degree-investigating-newsweek-financial-fraud

Kalil is the leader of CPA.com's sales organization, and is responsible for developing and executing go-to-market sales strategy across the organization’s product and services business lines to the CPA profession and adjacent professional markets. Under his leadership, CPA.com's sales capacity has expanded to drive deep engagement with the Big 4, Top 100 CPA firms, and small and midsize firms spanning client accounting services, sales and use tax, audit and assurance, and advisory practice areas.

After earning a bachelor’s degree in food industry management from Michigan State University, Kalil worked as an account representative with Thomson Reuters Tax & Accounting.

Kalil joined the CPA.com team in 2011 as a strategic account manager. After consistently outperforming goals and having demonstrated exemplary leadership and vision, he transitioned into Enterprise Business Development. His extensive knowledge of technology, leadership, and strategic management trends in the accounting profession has kept him in high demand for speaking engagements, allowing him to share vital insight and information to accounting professionals. He also led the launch of CPA.com's RIVIO Clearinghouse.

In 2017, Kalil was recognized by CPA Practice Advisor as a Top 20 under 40 Superstar for his influence and contributions to change in the accounting profession.

Matt Towers

Product Marketing Manager

Top Five Challenges Facing Firms Performing Prep, Comp and Review Services

Ensuring accuracy and compliance of your preparation, compilation and review services can often be demanding and time-intensive. Many firms are manually building out engagements and determining which procedures apply in order to meet compliance standards pushing them to overwork the process to ensure a positive peer review— which ultimately results in lower realization rates and limited time for higher-value advisory services.

What are the challenges your firm experiences in PCR services? In our infographic, we uncover top challenges we see firms face in PCR services.

#1 Threat of pass with deficiency or failed peer review grade causes firms to overwork engagements.

The fear of not complying with standards and getting dinged on peer review as a result often drives firms to go with a "more is better" approach leaving them exposed to additional risks.

#2 Difficulty keeping up with technology changes to stay competitive.

The rate at which accounting technology is changing can be daunting. Being behind the technology curve and using manual methodology puts firms at a disadvantage and limits their ability to become a full-service firm and gives them little time for higher-value advisory services for clients.

#3 Constant threat of data breaches requires vigilant attention to protect client data.

Often accounting software and financial statement guidance tools are not connected in a secured platform. This forces firms to use low-level security or manual processes to deliver and store financial statements, putting their clients' sensitive information at risk.

#4 Manual, back-and-forth client communications create bottlenecks and downtime on engagements.

It is time-consuming and tedious chasing clients down to get all the information firms need to complete their work, and the firms' clients may feel confused and frustrated by this as well.

#5 Diversity of challenges leads to firm inefficiency, creating a hidden opportunity cost.

Overworking engagements can be costly for assurance engagements. Exposing firms to risk if the work performed exceeds the agreement outlined in your engagement.

Watch our webinar, Balancing Compliance and Efficiency in Prep, Comp and Review Engagements, to learn more about these challenges and gain strategies your firm can take advantage of to feel more confidence and peace of mind around compliance.

Matt Towers
Product Marketing Manager, CPA.com
Matt is responsible for managing the CPA.com assurance product line. Matt has over 18 years of experience working in the tax & accounting technology industry with a specific focus in accounting & auditing technology and process. Having worked with thousands of accounting firms over the years to help them understand how to interweave relevant technology and business process, Matt has a keen understanding of the challenges and opportunities facing the profession today. Matt has been a featured speaker at thought leadership events and has been published in A&A publications writing on trends in the profession and the impact of technology.

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