Much has changed at J.H. Cohn from its start 85 years ago in Newark, N.J., to its current status as one of the largest independent accounting firms in the country with offices in New York, New Jersey, California and the Cayman Islands.

Thomas Marino, who came aboard J.H. Cohn in 1969 and was elected managing partner in 1998, has been at the helm of the regional powerhouse since 2002 when he was named the firm's chief executive.

Over the past year, J.H. Cohn added more than 75 professionals in its corporate governance services unit, added a personal client services group for high-net-worth individuals.

In an interview with WebCPA, Marino spoke about the impact mergers and acquisitions have had on J.H. Cohn, what he looks for before making a deal, the staffing challenges growing firms face and other critical issues affecting the profession.

How did your 2003 merger with the Videre Group, or other mergers, impact the culture at J.H. Cohn?

TM: A merger is all about people. The first two things we look at in considering a merger are people-integrity and people-culture. It goes without saying that integrity is a must. It is also true that if the culture is significantly different, we won't do the deal.  With the Videre merger, or any other merger, we spent a lot of time getting to know the partners to insure that the cultures would at least "fit" together. It is imperative that the partners generally share the same vision that you do. You have to be comfortable that from a philosophical point of view you are compatible.

Having said all of that, we can also say that virtually all of the mergers that we have done have contributed to a changing culture in the firm.  Part of the change comes through size. Eight years ago, we had 35 partners, now we have 95. 

In terms of having a template for a merger, what are the characteristics J.H. Cohn is looking for in a firm?

TM: The first thing to discuss is what we avoid. We already discussed a different culture, we also avoid practices that are in trouble. You don't do mergers for altruistic reasons.  We avoid mergers for the sake of obtaining volume. If one plus one only equals two -- we don't do the deal.  We won't do a transaction where all of the partners in the target firm want to retire.  We also will not look at deals outside our defined geographic area.

We do look for five things. One, the practice is successful unto itself. Two, there is a mix of partners in age, with the real benefit lying with the younger partners in respect to technical and salesmanship abilities. Three, geographic targets. Four, niche markets that we want to enter. And, five, synergy -- services that we can provide that the firm does not have and/or new services that can be provided by the target firm.

What sort of things are deal breakers?

TM: Quality control is number one. We are proud of the quality that we have consistently had over 85 years. This is reflected in our ability to have the American Institute of CPAs as a client for over 15 years. If a firm even balks at quality control, the discussion stops.  The other item that, as of the moment, is a deal breaker, is the name.  After 85 years, we are not ready to give up on this institution. 

What associations and institutes are J.H. Cohn affiliated with?

TM: Naturally, J. H. Cohn is a member of the AICPA.  We are members of the Major Firms Group, an association of the largest firms after the Big Four. And J.H. Cohn is a founding member of the international accounting association, SC International.

How important a role do those relationships play in running your business?

TM: The AICPA is critical for any public accounting firm. They represent our profession. The benefit of MFG is knowledge and information that you obtain from your peers. SC International becomes more and more critical as our economy becomes more global. Certain parts of our practice are international and we need qualified affiliates trained in compatible methodologies, SC International has provided a great benefit in satisfying short-term staffing needs.

In light of Sarbanes-Oxley prohibitions, how might joint ventures J.H. Cohn is involved in be affected?

TM: Right now, SOX prohibitions only have an effect on public companies.  The majority of our client base is still privately held businesses. Therefore, our joint ventures have not really been affected at all. As a matter of course, prior to SOX, we have rarely offered the services of our joint ventures to public companies, J.H. Cohn has only benefited by the "unbundling of services," that has occurred post-SOX.

In terms of marketing, do you think firms in your billing bracket are marketing themselves as aggressively as yours?

TM: Depends on the firm. Spending is a function of firm philosophy. A few years back we felt we had to be aggressive to get our name out in the public. We are now focusing in on niche marketing.

There seems to be a lot of talk in the media about the profession getting "hipper." Do you think the image of the CPA is changing?

TM: I don't know if the image is really changing.  I think the role of the "trusted advisor" has remained the same. The spectacular accounting failures of the past few years almost tarnished that image, but I think most people came to realize that it only involved a few bad people in the profession and that the overwhelming number of accountants were doing the right thing. Failures like Enron were not a result of internal controls. They were a failure of people's values -- values they should have learned at their mother's knee. 

What has changed, image wise, is that people seem to have become aware of the importance of the role of a CPA in the business world. There seems to be more of an awareness of what a CPA does and the value that they bring. It has certainly heightened the awareness of college, and even high school, students, where enrollments have been significantly higher in the post-Enron era.

What staffing needs does J.H. Cohn face?

TM: Almost all successful accounting firms throughout the country are suffering from accounting shortages.  For 10 years, preceding Enron, accounting enrollments were down. Only recently has the trend been reversed. Just by natural attrition there is a tremendous shortage today. That factor coupled with additional required services, such as SOX, have caused prices of accounting services to increase dramatically -- which, in turn, has caused client turnover.

Are you looking for midlevel CPAs, people right out of school, or a mix?

TM: We absolutely need both levels.  If you have any seniors, please send them over. They are actually harder to find than entry-level people. 

The profession seems to be split on the subject of outsourcing. Does J.H. Cohn do any outsourcing and what has your experience been?

TM: The controversy primarily centers on tax return preparation. We investigated outsourcing a number of years ago, and even beta tested a few returns.  For philosophical reasons, we have concluded not to outsource any tax returns for a number of reasons.

First, we didn't feel there is really any savings -- if you're not going to cut people, and we were not, there is only additional cost. Second, unless you train your younger people in the preparation of tax returns, there will be a void in skill sets down the road. Third, and most important, is client perception.  We didn't feel clients would be comfortable in us sending their personal tax returns to India for processing. A number of accountants try to get around this without telling their clients what they are doing; rationalizing that the server is in their office and therefore the return never really leaves the office. We feel that if you can't look your client in the eye and tell them exactly what you are doing, then you shouldn't be doing it.

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