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CPA firms can help manage clients' businesses without losing their independence.

Practitioners serving small businesses as management advisers often are faced with a problem - a loss of independence. But at the same time, taking on the added role of management adviser also is an opportunity - both for themselves and their clients.

When a client invites its accountant to take on a larger managerial role, even on a part-time basis, the independence issue becomes, central. That's because accountants are taught to stay clear of potential conflicts that might jeopardize their personal independence. As a practical matter, there is a way for CPAS to take a stronger management advocacy role without a need for independence.

And therein lies the opportunity.

While a CPA in that position no longer can audit or review a client's financial records (any compilation would have to disclose the lack of independence), there is little else to stand in the way of offering a valuable and needed service. (For details on the issue of independence, see Ethics Ruling 74 - Audits, Reviews or Compilations and a Lack of Independence.)

CPAS should accept the opportunity to assist organizations in as many management and financial areas as possible. They should, in essence, become the part-time "controllers" until their clients can afford or are ready for staff people to take over. CPAs should be willing to handle bank and other financing arrangements, give advice on normal management decisions, sit in with the owners in financial negotiations, provide projections and business plans and be mentors to their clients.

Of course, they also should be aware of the possible limited tenure of such engagements. As the client company grows and the need for a full-time controller with experience in corporate finance becomes necessary, the practitioner should be ready to step aside.

Taking on this new role provides a rare opportunity for the financial professional to enjoy the thrill of working with a business owner and helping an enterprise grow.

Here are some advisories designed to ensure the new relationship with a client will work:

* Fees should be kept at a reasonable level.

* The controller work should be done by professionals in the firm who have corporate experience.

* A partner should stay in close communication with the client.

* The CPA should be the guide and the client should make the final decision on all financial matters.

* The CPA firm should not get financially involved as an investor, lender, guarantor, check signer, etc.

* The firm should make sure the business's outsiders (such as creditors) are fully aware of the CPA's lack of independence.

* The accountant should not become too closely associated with the business to the detriment of his or her own practice.

CPAs who fill the role of manager and financial adviser by serving as part-time controllers for their clients will have a rewarding experience.
COPYRIGHT 1993 American Institute of CPA's
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Title Annotation:How to Turn a Controller into a Manager
Author:Person, Stanley
Publication:Journal of Accountancy
Date:May 1, 1993
Previous Article:How a controller can grow into a management role.
Next Article:Accounting integration in Europe - still on track?

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