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Society Helps Sharpen Business Acumen of Albany Journalists

By Lois Whitehead, Public Relations Manager

Albany-based reporters took a breather from their busy legislative beats to attend half-day financial sessions sponsored by the New York State Society of CPAs in October.

More than 50 journalists from the Albany Times Union, The Business Review, Gannett News Service, The Daily Gazette and other news outlets attended courses on understanding financial statements and forensic accounting.

Nicholas J. Mastracchio Jr., former chair of the New York State Board for Public Accountancy, led the first session, on understanding financial statements for journalists. Mastracchio’s presentation included a discussion of basic financial statements, balance sheets, income statements, cash flow statements, GAAP and audits. He also focused on ethics in the business world and explained why companies frequently reissue their financial statements.

David L. Evans, a managing director for UHY LPP, followed Mastracchio’s presentation with a session on forensic accounting. Evans has directed forensic accounting engagements for a number of high-profile fraud investigations. Often his firm is engaged to evaluate the fraud, determine its extent and ultimately begin to restore credibility back into the company.

“The recipe for fraud stems from the pressure that executives see themselves under. Management may have a vested interest, with bonuses and stock options, to overstate certain numbers that paint a more rosy view of company performance,” Evans said. “All fraud starts out small and grows. Eventually, it becomes apparent when it grows beyond the ability of those committing the fraud to cover it up.”

When asked by a reporter where to look for fraud-related indicators, Evans said that the Earnings Before Interest and Taxes (EBIT) figure is the key number that security analysts examine.

“It serves as a bottom-line number to compare performance and base executive performance on for compensation purposes,” he said. “The forensic auditor would look at this number and work back to the key drivers that influence the numbers, such as inventory reserves and certain valuations.”

Creating a corporate culture of strong personal ethics and integrity is the best prevention for fraud and greed, Evans remarked.

Richard G. Kotlow, also with UHY LPP, joined the discussion to talk about auditing.