CPA Firms Can Benefit From ERM

Source: The CPA Journal

Many companies use enterprise risk management (ERM) to assess and manage risk. In this article, the authors suggest that implementing ERM offers CPA firms two important benefits: It can help them enhance their own performance and it can improve their ability to consult with clients about ERM. The article provides an introduction to the ERM process and describes the authors' implementation of it in an 11-partner, 30-employee firm.

A Four-Step Process

ERM implementation can be summarized in the following four steps:

1. Be sure the firm has a strong internal environment, with partners who are “committed to competence, integrity, and appropriate internal control.”
2. Establish one or more objectives linked to the firm's overall business strategy, such as growing revenue or building the firm's reputation.
3. Identify risks – such as regulatory, technological, or competitive changes – that can hinder the firm's achievement of those objectives.
4. Formulate a response to each risk, which may involve avoiding, reducing, or accepting the risk.

One example of how CPA firms can respond to external risks is to establish appropriate controls. A firm might hire someone or assign a current employee to monitor the regulatory, technological, and competitive environment and inform management of significant developments, enabling the firm to anticipate and respond quickly to any changes.

The authors detail their implementation of ERM in the CPA firm mentioned above and also provide a sample CPA firm risk matrix and a sample monitoring report template firms can use in the ERM process.

For the complete article, read “ERM in a CPA Practice.”

From The CPA Journal, A Publication of the New York State Society of CPAs, July 2011.