An Afternoon with Alumnus Dennis Hickey: Thoughts on Accounting, Becoming a CFO, and Colgate-Palmolive
By Josh Ludwig, ZGAS Editor-in-Chief Emeritus
On May 6th, in an event titled “CPA to CFO: A Conversation with Colgate-Palmolive CFO Dennis Hickey,” Mr. Hickey discussed his outlook on his career decisions and how to succeed in the accounting world and Corporate America. Co-sponsored by the Executives on Campus (EOC) program and the Zicklin Graduate Accounting Society (ZGAS), the presentation was moderated by ZGAS President Charles Hwang. A 1970 Baruch College graduate, Mr. Hickey began his career at accounting firm Alexander Grant & Co. (renamed Grant Thornton in 1986), which focused on the middle market of the audit business. He decided not to stay at Alexander Grant for long, joining Helena Rubenstein, a subsidiary of Colgate, in 1977. As a CPA, Mr. Hickey was given new responsibilities to address current issues related to the Foreign Corrupt Practices Act, and has since moved throughout what became Colgate-Palmolive’s subsidiaries and offices. Over the years, he has had roles related to auditing, sales, and supply chain manufacturing at the firm.
In his conversation with Charles Hwang, Mr. Hickey answered various questions about issues related to his career development. In regard to a question about his opinion on company loyalty, Mr. Hickey stated that loyalty is always a two-way street. “You need to make an assessment on both sides,” he added, commenting on the importance of evaluating both an employee’s loyalty to a company and the company’s loyalty to an employee. In the end, Mr. Hickey remarked that loyalty comes down to employee performance. In other words, one must exceed as opposed to only meeting expectations, and he advised people to get outside of their comfort zones. According to Mr. Hickey, being “inquisitive” was the single most valuable characteristic necessary for success—the desire to delve into complicated issues.
Presented with the question of how to evaluate the pros and cons of corporate versus public accounting, Mr. Hickey launched into a discussion. Corporate accounting provides accountants to target specific companies and become more specialized within particular corporate departments. On the other hand, public accounting provides a wider exposure to more areas and industries more quickly from the entry-level perspective. He emphasized that every accountant faces the same challenge: how to obtain “depth of experience,” and then develop “breadth.” On the definition of success, Mr. Hickey explained that this has transformed over the course of his career. In the beginning, he defined success based on financial reward. Today, he defines success based on what he gets out of his job everyday. Although this may not always translate into “having fun,” he related it to the ability “to work with other people,” which is what he said “builds a business.”
Mr. Hickey expounded upon the qualities that make a successful CFO. In becoming facile with the worlds of finance and accounting, he explained that it was vital to become skilled in analytics. He also noted that it was necessary for people to have a willingness to “roll up their sleeves” in order to keep up with the dynamic nature of the position. In response to a question from Charles about which classes have been most helpful in his career, Mr. Hickey interestingly named English, public speaking, and history as the three top classes from his undergraduate years. English taught Mr. Hickey to write clearly and “get his message across.” Similarly, public speaking helped him learn how to present in a clear and concise manner. Lastly, history taught him how to understand society and deal with diversity. Mr. Hickey named courage and humility as the two qualities most essential to becoming a great leader. He associated courage with “getting outside of your comfort zone,” and humility with appreciating that, “no matter how good you are, you can always improve.” Mr. Hickey mentioned that these qualities were related to the three core values of Colgate-Palmolive: continuous improvement, caring, and global teamwork. In regard to whether his responsibilities as a CFO were different at Colgate-Palmolive than at smaller companies, he explained that the role of a CFO is similar from one company to the next. The differentiating factor between CFO responsibilities from company to company is related to where the company officer is allowed to have particular impact in executive management.
There was also a broader discussion about Colgate-Palmolive and its operations. Mr. Hickey discussed the culture of the company, mentioning that Colgate was founded in 1806 upon ethics and credibility. The company believes in “living” its values everyday to improve the lives of consumers worldwide. Colgate-Palmolive may not be the biggest consumer products company, but it prides itself on being the “best” by delivering diversity through global markets. Colgate-Palmolive embraces sustainability as “a way of life,” with efforts such as obtaining LEED certification and operating property, plant, and equipment in the “right way.” As a global company, Colgate-Palmolive has different kinds of compliance requirements across various markets—employees in local subsidiaries are often brought up with a familiarity with local GAAP and are essential to this extent. In response to a question of how Mr. Hickey has managed his work-life balance, he discussed the importance of being “honest” with oneself. As a parent, he emphasized “never making a commitment to a child and breaking it.” He added that, “When you make a commitment, you must deliver” in both one’s personal and professional lives.
Mr. Hickey fielded several different questions from members of the audience. In response to a question about whether CFOs require a CPA or accounting background, Mr. Hickey answered that neither one is necessary for the job. One needs to “get with the right company,” and “be willing to branch out.” Ultimately, there is a need to “understand a business” and the fundamental “drivers of financial statements” as a CFO. One audience member asked why Colgate got involved in the pet food business in recent decades. Mr. Hickey revealed that the firm’s dental and pet food product businesses involve a similar marketing competency. Whereas the firm promotes product sales through its professional relationships with dentists, it promotes pet food sales through its relationships with retailers, breeders, and veterinarians. He also discussed Colgate-Palmolive’s longstanding multi-domestic strategy for competing internationally. The firm has the philosophy of “winning on the ground,” where local managers who are experts with regard to the local environment understand their customers. Concerning whether a master’s degree is necessary for the success of a CPA, Mr. Hickey stressed that advanced degrees can help accountants in the area of analytics. He was also asked how the role of an accountant has changed over the last 30 years. Interestingly, Mr. Hickey pointed out that accounting has become more automated. For example, receiving clerks rather than company accountants are often charged with making simple journal entries. In addition, the closing process which used to occupy 80 percent of the month has been shortened to five days for multinational corporations like Colgate-Palmolive. Technological and organizational advancements have drastically reduced the extent of accountants’ past responsibilities. For these reasons, corporate accountants have become increasingly involved in forecasting and analytics. In particular, they are embedded across multiple areas of a firm rather than working in specific accounting departments.
Mr. Hickey’s career has been one shaped by increasing global interconnectedness and corporate expansion. His work has ranged from public accounting to the heights of corporate executive management. Dennis Hickey provided a detailed picture of the CFO position at a multinational firm, and the changing expectations of accountants in today’s corporate accounting environment. If his experience teaches us anything, it is that a title or position is only as significant as the manager who carries it. Not only did he present his view of Corporate America from the perspective of Colgate-Palmolive, but he also outlined the myriad paths accountants may take in their careers.
By Nelli Sidorova, ZGAS IC of Event Planning
Rarely do students get a chance to meet face-to-face with such outstanding leaders in accounting and financial reporting industry as the Chairman of the PCAOB, Chief Accountant of the SEC, and Chairman of the FASB. The financial reporting conference which took place on May 1st, 2014 at Baruch College had the aforementioned professionals in attendance, and presented a one-of-a-kind opportunity for students to hear the latest updates about accounting practices coming directly from the standard setters in all fields and spectra of the profession. The conference was moderated by Baruch Professor Norman Strauss, and the main topics on the agenda included current developments at the SEC, revenue recognition, and issues related to the private sector. An open discussion about the financial reporting issues for preparers followed.
The conference opened up with the welcoming address from Professor Norman Strauss and continued with the opening remarks from the Chief Accountant of the SEC Paul Beswick and Chairman of the FASB Russell Golden, who provided an update “straight from the top.” Mr. Beswick spoke about audit risk, internal control and disclosures, and specifically emphasized the importance of audit committees’ responsibility for audit quality and accountability to outside shareholders. Mr. Beswick expressed the idea that audit committees should put focus on audit quality rather than the cost of the service provider when considering whether to hire or retain an auditor. Mr. Golden continued talking about the future of the FASB, and the FASB’s dual focus on reduction of complexity and promotion of simplification in accounting standards.
After the opening remarks, the conference featured several panel discussions. One of the major topics discussed was the new standard on revenue recognition which will come into effect on 01/01/2017 (01/01/2018 for private companies). After long deliberations, the FASB and IASB have achieved convergence in this area, and the new standard will replace all the FASB, AICPA, and EITF literature on revenue recognition in the Codification. Companies throughout all industries and in all countries will use the following five-step approach to recognize revenue from customer contracts:
1. Identify contract(s) with customer
2. Identify separate performance obligations in the contract(s)
3. Determine the transaction price
4. Allocate the transaction price to the performance obligation(s) in the contract
5. Recognize revenue when (or as) the entity satisfies the performance obligation(s)
The panel discussed how to recognize revenue according to the new standard, and went into details discussing each of the steps above. Interestingly enough, the new standard does not explicitly mention completing the earnings process and matching revenues and expenses. The new standard will also require more judgment and estimates than today. The FASB and IASB have set ambitious goals when working on this standard, such as removing any inconsistencies, being more robust, comparable, useful and simple, and now these objectives will be put to the test. If the practice proves that these goals have been accomplished, it will be a successful step to making the accounting standards more globally comparable.
There were many interesting speakers at the conference, however students who are taking the “Contemporary Topics in Accounting” class with Professor Strauss would have probably found the presentation by FASB Technical Director, Susan M. Cosper, the most exciting. Ms. Cosper covered a lot of issues that Professor Strauss’s students write their term papers on, such as current updates on leases, financial instruments, the disclosure framework, and others. This gave students a unique opportunity to not only hear the latest updates directly from the FASB, but also see an exemplary presentation of technical information and ask questions on current issues in the accounting world.
In general, students who were able to attend the conference believed that this experience not only provided them with an opportunity to receive a lot of useful information, but gave them a broader outlook on the process of accounting standard-setting. In addition, the conference also gave students a clearer idea of what it is like to work as an accountant in today’s workplace. in the accounting profession.
By Josh Ludwig, ZGAS Editor-in-Chief Emeritus
On April 22nd, Thomas Farley of the New York Stock Exchange (NYSE) spoke at Baruch College as part of the Mitsui USA Lunch-Time Forum presentation series, sponsored by the Weissman Center for International Business. Director of the Weissman Center for International Business Prof. Terrence Martell, also currently an independent director of ICE, gave Mr. Farley a warm introduction at the beginning of the presentation. Mr. Farley, Chief Operating Officer of NYSE (a wholly-owned subsidiary of IntercontinentalExchange Group, Inc.), has worked at parent company ICE since 2007. Mr. Farley’s presentation was billed as a discussion of ICE’s acquisition of NYSE, and subsequent integration of the historic exchange into the parent company. This integration was presented from four vantage points: the political and policy environment for, strategy for, management of, and country and regional perspectives on international business.
Mr. Farley divided his presentation into three segments: his personal introduction, a strategic and operational perspective on the integration of NYSE, and what he called the “growing pains” of integrating NYSE and its culture. After attending Georgetown, he worked as an entrepreneur in a firm that built financial software designed to value products such as jet fuel hedge contracts. Working in the quantity futures industry early on his career, Mr. Farley was fortunate to cross paths with Jeffrey Sprecher. As Mr. Sprecher rose through ICE and became Chairman and CEO, he eventually reached out to Mr. Farley, who accepted a job offer from him to become President and Chief Operating Officer of ICE’s U.S. futures business. Based in Atlanta, GA and founded in 2001, ICE introduced electronic futures trading to financial markets (prior to this, futures had been traded on an exchange floor for the past 160 years).
When ICE purchased NYSE, the former was worth $13 billion, while the latter was worth $11 billion. Mr. Farley compared some of ICE’s prior acquisitions to NYSE including the floor-based New York Board of Trade and credit-default swap exchange Creditex, which each posed separate challenges related to integration into the parent company. In the acquisition of NYSE, ICE absorbed three distinct businesses in addition to the New York Stock Exchange including the London International Futures Exchange (LIFE), Euronext, and NYXT. ICE’s strength was in running futures markets, and it was looking to expand into interest rate futures by acquiring LIFE. In the acquisition of this business, ICE sought to take out layers of fixed cost in the consolidation: LIFE trading was moved under ICE technology, LIFE trades were now cleared under ICE’s own clearinghouse, and LIFE itself was shut down, leading to employee reductions. On the other hand, ICE recognized it was unfamiliar with the European regulation that governed the business of Euronext, and ultimately divested itself of this exchange. NYXT duplicated technology services already sold by ICE, and the Atlanta-based exchange sold this unit after the acquisition.
The acquisition of the New York Stock Exchange involved the difficult task of integrating both three equities exchanges and two options exchanges. ICE had never run an equities exchange and, as Mr. Farley put it, knew “less about options.” However, ICE recognized that it had a strong core competency in running exchanges. ICE viewed the New York Stock Exchange as an incredible brand—one that could also help in its greater dealings with customers and regulators. Most New York Stock Exchange employees were retained for a discrete period of time immediately following the acquisition to help with the transition. ICE ultimately saw the opportunity to modernize the technology of the business, which had legacy systems from its own prior acquisitions and long history of operations.
The “growing pains” of the NYSE integration were mainly related to cultural differences between the New York Stock Exchange and ICE. These differences pertained to how employees behaved, interactions between staff, and company values. On one hand, the New York Stock Exchange had a command-in-control hierarchy. There were specific lines of command and responsibility, and the company was run in this way like the U.S. military (this also led to organizational inefficiencies, and ICE later removed five layers of senior management during the integration process). The culture of this business not surprisingly inspired little debate in the workplace. Payroll was less than at other exchanges, but there were often benefits to employees such as free food at work and frequent opportunities to work at home. On the other hand, ICE functioned like an “amoeba,” as Mr. Farley described—employee hierarchy had little to do with the flow of information. ICE emphasized employee growth and development— “mentorship in both directions” was encouraged, and issues were debated across employee ranks. In addition, cross-dimensional collaboration was a major feature of the ICE workplace, and work at home was discouraged. Employee pay was comparatively higher and varied with the success of the parent company, but ICE did not offer the same benefits to employees that NYSE did.
Mr. Farley discussed the process of integrating the New York Stock Exchange with regard to transforming company culture. He emphasized the importance of stressing to NYSE employees how ICE would do business going forward. Mr. Farley suggested that bonuses could be tied to how well NYSE employees conform to the new ICE culture as well. He mentioned a strategy of “swapping” employees across NYSE groups and divisions to help break the sense of the old company culture and introduce a new work environment. To this extent, Mr. Farley also made employee reductions at the New York Stock Exchange and hired new replacements to spearhead the acculturation of the acquired exchange. He also had a goal of recognizing stars in the New York Stock Exchange partially for purposes of motivating and demonstrating the rewards for talent and stellar work performance to new employees of the consolidated company. Above all, Mr. Farley stressed the importance of being “firm” with the acquired New York Stock Exchange and its employees in the imposition of ICE’s culture. In this way, ICE and Mr. Farley would ultimately have to be unbending and uncompromising in the acculturation of its acquisition.
There were several notable questions posed by audience members to Thomas Farley during the question and answer session that followed his discussion. In response to a question about the history and future of equities exchanges, Mr. Farley mentioned that floor-trading constitutes less than one percent of trading in the United States, and can be an effective forum for openings and closings. 60 percent of trading is done through Nasdaq, NYSE, and BATS, and 40 percent of trading is done off-exchange. With regard to the future of exchanges, Mr. Farley commented that the history of exchanges has been one of fragmentation and consolidation. Although there has been a large amount of consolidation in the industry in recent years, fragmentation is starting to come back. There was also a question about the future of the retail stock investor. Mr. Farley commented that there could be a total rethink of the retail market in the future, stressing that discount brokerages do not necessarily get the best price from hedge funds or high frequency traders when submitting orders through retail aggregators. Finally, in response to a question about the market for initial public offerings (IPOs) on the New York Stock Exchange, he remarked that the market has changed over the years. Unlike years ago, entrepreneurs are not as eager to go public on the New York Stock Exchange. Although legislation such as the Jobs Act have encouraged IPOs by not requiring the submission of all financials, the Sarbanes-Oxley Act has put huge regulatory and compliance burdens on public companies. As a result, many small to medium companies are avoiding IPOs, and there is consequently less coverage of this sector by investment banks and research houses.
In charge of an inordinately large project, Tom Farley has labored to seamlessly integrate NYSE into ICE since the parent company’s acquisition. Mr. Farley notably did not discuss the more concrete, practical implementation of the acquisition, including the integration of the New York Stock Exchange’s old legacy systems. Aside from this issue, he painted a vivid picture of consolidation trends in the industry of securities exchanges from the perspective of his employer. ICE Director Terrence Martell and the Weissman Center for International Business were pleased to host Mr. Farley. The Weissman Center for International Business is also a sponsor of the Zicklin Graduate Accounting Society.
By Laura Hoffmann, ZGAS IC of Editor-in-Chief
On Tuesday April 29th, 2014, Executives on Campus at Baruch College sponsored “JOB$MART CPA Panel: Career Opportunities in Accounting.” The two CPA’s on the panel were Nicholas DiMola and Gene Ozgar.
Nicholas DiMola is currently working as the Principal of Quality Plus & Associates (QP&A), an internal audit service firm, which he co-founded in 2007. He has over 35 years of experience working in financial and internal audit positions in the transportation and governmental sectors of New York City. Specifically, he spent six years in the position of Chief Financial Officer (CFO) and Vice President for the Metropolitan Transportation Authority (MTA) Long Island Rail Road (LIRR), and over twenty years in the position of Chief Audit Executive (CAE) for the MTA. As CFO, he acted as the MTA’s Internal Control Officer and assessed corporate risks and internal controls, and directed employee internal control training. Further, he directed the Controller, Budget, Treasury, Pension, and Process Re-engineering departments. As CAE, one of his major accomplishments was consolidating all of the internal audit departments of the MTA into one unit, consisting of 100 people. In the new unit, he directed financial, operational, construction, contract, and technology audits of the MTA’s operational and capital program; he also created a new audit functions within the unit, for real estate, capital construction, and treasury. As CAE, he was in charge of the MTA’s investigative audit group that monitored and detected fraud in the revenue, procurement and contract divisions. He was also the staff member assigned to the Audit Committee of the MTA Board, and worked with them to develop many initiatives, such as their Charter. DiMola received his BBA in Accountancy from Baruch College, and MBA in Finance from St. Johns University. During his long and distinguished career, DiMola served as the President of the Institute of Internal Auditors (IIA) New York Chapter Board of Governors, and as Chairman of the IIA’s Professional Conferences Committee. He remains highly involved in the IIA, both as a teacher and speaker. Additionally, he served as Chairman of the American Public Transit Associations (APTA) Internal Audit Committee. He also worked as an adjunct professor at Fordham University, teaching accounting courses.
Gene Ozgar currently works in KPMG’s national office as a National Risk Management Partner in the Management Consulting Division. He is also in charge of developing IT aspects of KPMG’s audit practices, addressing PCAOB auditing standards and directing risk management in the area of IT. In his previous position at KPMG, as IT Advisory Partner in Charlotte, NC, he assessed IT functions within financial statement audits, and provided advisory services for system controls, information security, and IT governance. At the start of his career with KPMG, he was a financial statement auditor, and eventually moved into the area of IT, founding the Company’s IT Advisory Practice. Ozgar received a BBA in Economics & Finance and MBA in Accountancy from Baruch College.
After DiMola and Ozgar’s bios and introductions were made by the session moderator, Meredith McCanse, Vice President of the Zicklin Forensic Accounting Association and Graduate Assistant at the Executives on Campus Mentoring Program, the workshop session began in the format of an interview:
Meredith McCanse: Can you give us a little more insight into both of your backgrounds and how you got to your current positions?
Nicholas DiMola: I graduated from Baruch College with my BBA in 1973, when the school had one building and the Vertical Campus (VC) Building did not yet exist. Following graduation, I wanted to work for what was at the time the Big 8. I was unable to land a position at one of the firms, so I followed a different career path. I took a job at the New York State Comptroller’s Office, which ultimately led to my 35-plus year career with the MTA. I left the MTA in 2007 to co-found a company called Quality Plus & Associates (QP&A), which you mentioned before. I presently work there. I also speak/lecture in the areas of audit and quality assurance, often at Baruch College and St. John’s University.
Gene Ozgar: First, I would like to touch on one of the points Nick just made, in regards to what is today the Big 4 accounting firms. Many students think it’s a tragedy if they do not get a job at the Big 4 post-graduation. I urge them not to think this way. I’ve worked with many people from small accounting firms, and have come to realize that such individuals are better-rounded in terms of work experience, and often have a better work-life balance than those who work for the big accounting firms. So my advice is, don’t get hung up on the Big 4.
Nicholas DiMola: I completely agree.
Gene Ozgar: Going back to the question posed, as was mentioned earlier, I attained my undergraduate and graduate degrees from Baruch College. While I was an MBA student, I worked for the Dean of the Zicklin School of Business at the time. Once I graduated with my MBA, I got a job with KPMG as an Auditor. From there, I moved into a very new advisory area at the time, IT, and helped set up KPMG’s first IT Advisory Services Unit (in the early 1990’s) with a total of 37 people. By 2006, when I returned to New York City from my position as IT Advisory Partner in Charlotte, NC, I realized that the IT Advisory Services Unit had grown to 2,700 people, which I found incredible. I now work in the national office of KPMG in the areas of management consulting, IT implementation, and IT risk. Essentially, my job is to make sure that client IT methods are in compliance with SEC regulations and other requirements. Additionally, I often speak/lecture at Baruch College.
Meredith McCanse: What skills are most crucial for students today, even more so than in the past (for instance would it be soft skills, people skills, or technological skills)?
Nicholas DiMola: I would say communication skills, which include speaking, reading, and writing. As an auditor, one must also learn how to listen and observe. In fact, that’s how I learned the most in my career, by listening and observing. Additionally, many of the skills I picked up along the way were from my mistakes. I was also able to develop a well-rounded skill-set because I understood, early on, that money is not a good motivator.
Gene Ozgar: I second what Nick just said, and agree that communication skills are critical. In terms of skill-set development, the world is changing rapidly so professionals must constantly reinvent themselves. I can tell you, for instance, what technological skills you may need today to be a good accountant or auditor, which would surely include outstanding Microsoft Excel skills. However, I can’t tell you what technological skills you will need in the future for the profession. For instance, when I worked in e-commerce at KPMG, I was always developing new skills, and halting the use of others I developed at earlier points. However, there are some guiding principles upon which a basic skill-set should be developed, that will always be required in the profession.
Nicholas DiMola: I believe strongly in the guiding principles Gene just spoke of. A few examples of them would be: to always have integrity, strive to go beyond the accounting rules, learn about the industry in which one’s client operates (which some accounting firms push for, as they require industry specialization), understand why companies make and lose money, and have a thorough comprehension of financial statement disclosures and how to use them effectively.
Gene Ozgar: No matter which field of accountancy one practices in, be it auditing or taxation, the key is to be able to establish how business processes work, in order to have a foundation for those guiding principles. Further, in support of this, there must be a common understanding of how the business processes work within a company and/or division.
Meredith McCanse: In terms of the CPA Examination, did all of the material you learned while studying for it, which I’m sure was extensive, bring about any benefits once you began your careers, other than just aiding both of you in attaining your CPA licenses?
Gene Ozgar: Students may go into a job in which the CPA Examination is highly relevant, but even if they do not, the key is to have a conceptual understanding of the concepts tested, since portions of the CPA Examination are relevant for many jobs in the profession. As for the specific facts that are tested, many will not remember them after a few weeks.
Nicholas DiMola: The CPA Examination is very difficult. Studying for and ultimately passing the Examination, taught me that I had the capability of accomplishing something. I took three parts at once with scores of better than 75%, which is the passing score. In addition to studying for the Examination, I was working at my first job and just got married. Thus, Examination preparation helped me learn how to better balance my time and establish priorities.
Since I ultimately did not get a job in public accounting, the Examination helped me to better understand accounting and business processes, going back to what Gene just discussed, which was highly beneficial; as was having three initials after my name (CPA). In a hiring situation, if it comes down to a choice between someone with or without a CPA license (all else equal), even for a job that is not in public accounting, I would pick the individual with the CPA license.
On a side note, I recommend that students take the CPA Examination while they are in school or immediately after, because the material is still fresh. I also highly recommend taking a CPA review course.
Gene Ozgar: As I have advanced in my career, I have begun to see that attaining a CPA license says an individual is disciplined and they get things done. Additionally, the reason why many firms hire KPMG for an IT project, instead of our competitors, such as Accenture, is because we hold CPA licenses. The license comes with a code of professional conduct, so clients understand that we will be objective and not try to push products or services on them.
Meredith McCanse: Bank of America recently disclosed that they are to suspend share buybacks and dividend increases because of a $4 Billion error, discovered by a junior accountant. Have either of you ever been in a situation in which a major error was discovered by a junior accountant on your team?
Gene Ozgar: The question you ask is directed towards judgment. No matter which division one works in, they must make sure they truly understand what is going on within any audits they conduct or partake in, and that they do not disregard anyone’s opinions, including junior staff. When I was an Auditor, I was auditing the New York State Insurance Fund, a company that issued worker’s compensation policies for risky companies, especially those in construction, which most other insurance companies would not issue. One of the lower level auditors on my team posed the question, “How can the New York State Insurance Fund be allowed to set the discount on insurance premiums they offer, from 0-100%?” It turned out that an individual, who worked in the Credit and Collections Department of the New York State Insurance Fund, was issuing 100% discounts on the policies of companies that were run by Mafias. This huge discovery of fraud was all because a lower-level staff auditor wouldn’t take no for an answer, and senior auditors listened.
Nicholas DiMola: Does everyone remember the accounting scandal that took place within WorldCom in 2002? Cynthia Cooper, the Vice President of Internal Audit at WorldCom at that time, uncovered and revealed a huge fraud committed by the Company, amounting to billions of dollars. Cynthia, was a small player in the organization, but had the tenacity to speak out. She wrote a book about it, which I recommend everyone read, entitled: Extraordinary Circumstances: The Journey of a Corporate Whistleblower. To provide a brief summary, WorldCom operated in the telecommunications industry, which was very competitive. Cynthia and her staff did the internal audits for the Company, and one day realized that while most other U.S. telecommunication companies underperformed or broke-even, due to the fierce competition in the industry, WorldCom always over-performed. Upon conducting secretive research, they uncovered that many fraudulent activities were occurring within the Company. In particular, expenses occurring in one period were spread over many periods, which inflated income. Cynthia was warned not to go any further with her findings by many in the organization, including the Board of Directors. She did not listen to them, and because of her ethics and integrity, WorldCom went out of business, as a result of her findings. Cynthia won a Person of the Year Award in 2002, from Time Magazine.
Gene Ozgar: The tough part is acting with integrity when one knows it will implode into a nightmare, such as Cynthia’s. CPA’s have a code of conduct, as we discussed before. It is tough, often times, to get through day-to-day activities with 100% integrity, but it can be done with the right foundation and guiding principles. For example, there was an individual I worked with at KPMG some years ago, who had a team of employees working under him, and was always on the lookout for opportunities for his team to move up in the organization. He was not greedy, and never attempted to keep the best workers for himself, but always acted with integrity, and tried to help them in their career paths. Day-to-day there will always be ethical dilemmas with which professionals must deal, and the true mark of a professional is dealing with them in the correct manner.
Meredith McCanse: What was the most challenging project either of you had to deal with in your careers? How did you get though it?
Nicholas DiMola: For me, it would be setting up and consolidating the Auditing Department of the MTA; I had to bring 142 agencies together under this project, which was not easy. Further, the general feeling about the project within the organization was opposition, in my opinion, because MTA employees were taught they had to dominate all they engaged in, which was not possible for this project. An additional challenge was that I had to put people on the implementation team that would complement my skills. Meaning, I had to really know my strengths and weaknesses, so I could find people with the right skills to cover those weaknesses. Even in the face of all those challenges, in the end, the project was a success, and the MTA’s Auditing Department remains consolidated today.
Gene Ozgar: With all of the change in today’s world, most projects are transformational and require change management. Often, as Nick mentioned, people are defensive about new projects, usually because they cause changes to what they are used to. For this reason, one of our biggest divisions at KPMG is Change Management.
An example of a challenge I faced, was when I was doing an IT Audit of a public retail company at KPMG. The Controller of that company was very hard to handle when it came to the audit, but the CFO was great. Since the Controller was so difficult, we suspected that he was perpetrating a fraud. Eventually, he toned it down, but ultimately left the organization. The moral of the story is that no matter what the situation is, one must be forthright and handle it. Individuals should never avoid dealing with a situation, and always talk to all parties involved to get to the bottom of things.
Nicholas DiMola: I would like to add, that in order to be forthright, one needs to always know what they are talking about, accomplished by doing as much homework as possible.
When I directed Internal Audit at the MTA, I told my staff to never do audit work from their desks, but only in the field. The reason for this is that people in the field will talk to you, but they usually won’t respond to e-mails. Talking to people in the field also allows one to come back with a better sense of problems that may exist.
Gene Ozgar: No matter what type of audit one is doing, internal or external, they must talk to people in-person. I would say to get results from communications, a 100% success rate would come from speaking in-person, 40% on the phone, and 2% via e-mail. In an audit setting, one is trying to find problems, so people feel nervous about this. However, as they get to know you, they start opening up and talking; a result you usually will not get from the phone or e-mail.
Meredith McCanse: I would like to now open the floor for an audience Question & Answer session.
Audience Member: Going back to the discussion about fraud discovered in auditing procedures, in your opinion, what do you think caused Arthur Anderson to miss all the red flags with Enron?
Nicholas DiMola: At the time, many of the accounting firms understood their responsibilities—for them the lines were not blurred, meaning that clients were not viewed as the total package, but as financial statement audit clients. Arthur Anderson and Enron were different. The problem, often, is that people behave based on incentives. This is the main reason why most of the large accounting frauds, including Enron and WorldCom, occurred. Further, when it comes to the revenue generated from auditing clients, some audit firms, especially Arthur Anderson, felt they could not jeopardize large sums of revenue by not giving companies’ unqualified opinions.
Gene Ozgar: There are many things auditors cannot do today as a result of the Sarbanes-Oxley Act (“SOX”), enacted to deal with these large accounting frauds perpetrated in the early 2000’s, which is a good thing. Additionally, within the independent audit committees required by SOX, members usually go above and beyond the rules and regulations to ensure that everything is up to par within their company’s system of financial reporting, which is even better.
Audience Member: Are there any designations that could complement an Accountancy degree?
Gene Ozgar: I would say a Certified Fraud Examiner (CFA) license, a degree in IT, and a Chartered Financial Analyst (CFA) license, which has its own code of conduct.
Audience Member: Do you think the rules and regulations put in place post-Enron, especially SOX, have fully worked, or should more be done?
Nicholas DiMola: We tend to be more reactive. When I worked for the MTA, I always looked to be proactive, which I think should be the goal of most organizations.
Gene Ozgar: The process is important. We must always evaluate our processes in a proactive manner, as Nick mentioned, to look for weak links, in order to prevent them from re-occurring. We need to look at the surface of things, oftentimes, to find those links.
With all the regulations in place today as a result of SOX, external audits can be very costly. For instance, the SEC requires two audit opinions. However, such costs are surely necessary in order to prevent accounting frauds in the future.
One of the criticisms I have heard post-SOX, is that the auditor’s opinion on internal controls is not as pronounced as it should be. Maybe more work could be done in this area.
Nicholas DiMola: External auditors are responsible to find fraud. This can of course be difficult, because people within organizations that commit frauds are very knowledgeable. Further, frauds often occur because individuals are pressured to make numbers; and once such a fraud is started it is hard to stop, because certain thresholds have been set and financials are run with incorrect beginning numbers.
No one can say that there will never be an accounting fraud again, but with the extensive regulations we have in place today, one should hope that the probability of such frauds has decreased.
Audience Member: How come we have not seen any major accounting frauds since SOX was put in place?
Nicholas DiMola: This is probably because we have put such a strong system of regulation into place (SOX) that requires stringent internal controls. We also need to understand that internal controls are business processes, and we can’t look at them once and assume they are accomplishing their function. We must review and update them constantly. Internal controls are the responsibility of management, and the auditor makes sure they work. One hopes that with time, the emphasis on such controls does not go down.
Gene Ozgar: To reinforce Nick’s point, the commission of fraud decreases with a good control environment. It is especially successful, if management has incentives/pay based on such a control environment.
With that last question, Meredith McCanse thanked Nicholas DiMola and Gene Ozgar for their time, and insight into their careers and vast knowledge of the accounting field. Overall, the workshop was very insightful, and the Zicklin Graduate Accounting Society (ZGAS) looks forward to the next Executives on Campus-sponsored JOB$MART CPA Panel.
By Laura Hoffmann, ZGAS IC of Editor-in-Chief
On April 28, 2014, the Zicklin Graduate Accounting Society (ZGAS) hosted its signature “Mock Interview Event,” sponsored in part by Becker Professional Education. The firms that participated in the event were: Anchin, Baker Tilly, BDO, Cohn Reznick, Deloitte, Grant Thornton, McGladrey, ParenteBeard, PricewaterhouseCoopers, and WeiserMazars. Ellen King, Associate Director of Employer Relations at the Graduate Career Management Center (GCMC) attended the event, as did Jack Pullara, Manager for Working Professional Career Programs at the GCMC, who also acted as a floater interviewer for student interviewees. Additionally, Professor Robert Colson, Distinguished Lecturer of Accountancy at the Zicklin School of Business, attended to give the introductory/welcome speech.
Professor Colson kicked the event off by thanking all of the professionals/recruiters that were in attendance, for supporting both Baruch students and ZGAS. He next stressed how crucial it is for students to practice their interviewing and networking skills. He then went on to explain that students should welcome all feedback from their interviewers, especially negative. He ended by noting that the purpose of the event was for all attendees to find their interview and networking experiences rewarding.
Following Professor Colson’s motivating speech, the interview sessions began. Student participants were given up to five 15-minute mock interview sessions with various professionals/recruiters in attendance. The structure of the interview was determined by the interviewer, and in most cases, interviewees were asked a series of interview questions and received feedback based on their answers.
Becker Professional Education representatives were present at the event to answer questions about the CPA Examination and the review courses they offer. Since most students had more than one interview, in between sessions, many spoke with the representatives. In addition to receiving information, students also got swag, including pens and t-shirts, and sign-up cards for a CPA flash cards raffle.
When the mock interview sessions ended, and the event came to a close, Charles Hwang, President of ZGAS, gave a closing speech thanking all participants of the event. He offered a special thanks to the recruiters/professionals in attendance and members of ZGAS that made the event possible. He also offered students and professionals extra time to network with one another.
Overall, the event was a success. There were 86 attendees, consisting of 65 students, 18 recruiters/professionals, Professor Robert Colson, Ellen King, and Jack Pullara.
We had the chance to speak with a few students and a professional at the close of the event. Here are some of their thoughts on the Mock Interview Event:
“I think this was a great event for students, as they always need feedback before they go on to actual interviews. I would have appreciated participating in this sort of event while pursuing my degrees. I enjoyed my afternoon here and the time I spent interviewing and speaking with students. I also enjoyed the closing speech given by the ZGAS President, Charles Hwang, as it ended the event very nicely. I look forward to participating in this event again.” - Katelyn N. Kogan, Audit Senior, Real Estate Group, WeiserMazars LLP
“I think the event was great. I received some helpful comments on my interview performance from professionals from two different accounting firms, which I can surely use in future interviews. I would’ve really benefitted from 1-2 additional sessions. I would surely attend an event such as this again.” – Bin (Linda) Zhou, MS Accountancy, Fall 2015
“I enjoyed being part of the Mock Interview Event. I thought it was great to interact with professionals in the field and exchange information with them. Also, the feedback I received was useful. I was told that many of the skills I currently use at my job are transferable to a position in the field of accountancy.” – Enkeleda Gjeci, MS Accountancy, May 2016
“My overall experience was enjoyable. My interviewer was an Audit Director, which is a position I would like to work in one day. She tried to cover as many interview questions as possible. She also explained the importance of certain skills that must be present for a job in Auditing, including leadership skills. This is my first time attending ZGAS’s Mock Interview event, and I will surely come for the next one.” – Xiaochen (Lily) Li, MS Accountancy, Spring 2015
Hello ZGAS Members,