An Interview with AICPA President and CEO on 2013
The following is an interview with AICPA President and CEO Barry Melancon, CPA, CGMA. He was asked to share his thoughts about some of the major issues and trends that will affect CPAs in 2013.
In the coming year, we will see the first efforts of the Private Company Council. What changes can CPAs and the companies they serve expect to see?
The Financial Accounting Foundation’s Private Company Council was created to address issues affecting companies that need GAAP-based financial statements. The PCC only recently began meeting, and will be weighing in on existing standards and ones in development. Private company accounting stakeholders are expecting prompt action by the PCC in modifying GAAP to bring more relevance and simplification to financial reporting.
The AICPA is developing the Financial Reporting Framework for Small- and Medium-Sized Entities, which is expected to be published in the spring. How will this impact CPAs?
CPAs can begin putting the FRF for SMEs to work soon after tax season is over, depending on the comments we receive on the proposal that’s out until Jan. 30. In terms of how it will impact CPAs, private companies currently have a range of options, from OCBOA reporting to GAAP exceptions, and this framework will provide an additional choice. At the same time, FRF for SMEs brings some consistency to accounting for smaller private companies that don’t require GAAP financial statements. The FRF for SMEs will be more robust than tax- or cash-basis OCBOA and will be a principles-based framework that can be consistently applied. CPAs should be able to use the FRF for SMEs to prepare financial statements in 2013 and will be able to compile, review or audit those financial statements. We don’t expect to see frequent revisions to the framework, which will be a real benefit for smaller CPA firm practitioners. To make the framework easy to use, as soon as the final FRF for SMEs is released we will provide members with implementation guidance and educational materials they can use with bankers or clients’ other financial statement users. We’re also taking steps at the Institute to ensure that the marketplace is aware of the framework and able to understand the value of financial statements based on FRF for SMEs.
What do you expect to come to fruition in 2013 in terms of regulation?
Of immediate concern is the debate on fiscal cliff issues and the huge tax changes that are possible just as tax season begins, adding uncertainty to tax planning and tax strategy. We are certainly going to have a voice in that discussion, and we plan to have an important role in the dialogue on a wide range of other tax issues. No matter what actions Congress takes, there will be many short-term fixes, and we will speak out in the lively debate that is sure to follow as more long-lasting changes are discussed. One of our main roles will be to advise Congress on ways to simplify the tax code and avoid unintended consequences when writing tax law.
We expect the Public Company Accounting Oversight Board to complete its review of mandatory audit firm rotation in 2013, and that we’ll see further evolution on implementation issues associated with the audit reporting model. Elsewhere, we’re preparing to deal with the uncertainty surrounding implementation issues relating to enactment of many provisions of the Dodd-Frank Act and of health care reform.
Finally, fiscal responsibility—at all levels—will remain an important agenda item for us. The profession highlighted the country’s precarious financial situation in our What’s at Stake video featuring then-chairman Gregory Anton, and our board of directors recently passed a resolution supporting non-partisan efforts by the Campaign to Fix the Debt and the Comeback America Initiative to promote fiscal responsibility and sustainability. Our Total Tax InsightsTM calculator offers taxpayers a perspective on the tax levies that affect them. These are all significant issues for the country right now, and we will be continue to play a leadership role in helping policy makers to address them.
As Baby Boomers move into retirement, how will the AICPA keep attracting both the quantity and quality of CPAs needed to replace them?
The good news is that since the 1990s, we have been actively working to attract the top-quality young people we will need to balance out the number of retiring Baby Boomers. For several years, record numbers of people have been majoring in accounting, entering the profession and taking the CPA Exam. Our unique and successful programs continue to attract future accountants and develop young CPAs, such as the Leadership Academy, Start Here. Go Places., This Way to CPA and tailored conferences. Younger CPAs are serving on AICPA and state CPA society committees as well. Overall, when you consider job demand, opportunities and professionalism, this profession is very attractive to the next generation.
We will continue to offer programs that groom the next generation for leadership. The AICPA National Commission on Diversity and Inclusion is an important element of this initiative if we hope to attract members of a very diverse young generation. The face of entrepreneurship is very diverse today as well, so we want to be a profession whose members look like the clients we serve.
Our message to the next generation is simple: Being a CPA is one of the best careers you can have. In the face of a difficult, worldwide economic downturn, our profession has proven to be one of the most recession-proof. All indications are that demand for people with the ethics and competencies of CPAs will remain strong. It's hard work, but with the coordinated efforts of members, state CPA societies, the AICPA and, of course, universities and their faculties we are achieving success and will continue to do so.
What does the CPA profession of the future look like?
We are in a very transformative time for the profession. In addition to becoming a more diverse and international profession, I think we’re also going to see significant changes in the shape of firms. I believe that within five or six years, we may see as many as a dozen half-billion-dollar firms in addition to the Big Four. The top 500 firms clearly have many new chances to grow because of succession issues, which will drive an expansion in the number of large local and regional firms.
In the midst of this change, I think that as a result of complexity, smaller firms will become more involved in specialization and partnering arrangements with larger firms. Larger firms will have to be ready to deploy the infrastructure and the technology necessary to address ever more complex challenges. On the corporate side, those with the Chartered Global Management Accountant® designation will elevate the quality of the decision making and the advice that CPAs give to employers, and enjoy great global mobility. Changing technology will have a significant impact on the services we provide, opening new opportunities for CPAs. As always, we’ll be there to provide the information and resources they need to succeed in their efforts.
What new or emerging technologies will have the greatest impact on the profession over the next year or a few years?
Cloud technology has to be on the top of the list. We believe it will have a significant effect on how organizations handle their accounting work. It will change how CPAs provide services to clients and work with them. Our white paper on this topic and our Digital CPA: CPA2Biz Cloud User Conference are some of the resources we’ve made available to members to help them get up to speed. We’re also developing apps and other tools that our members—especially those in smaller firms—can use in various areas, including training and education. We’re monitoring changes in social media because it will have an impact on how firms hire, attract and manage employees. We’re also looking at the implications of big data, which may affect the elements of an audit and how audits are performed or how we use our analytics. On another front, CPAs can provide a valuable service to clients by helping them understand the risks to their functions and their reputations from technology-related privacy and security issues. We’ll be monitoring all these areas in 2013 so we can help members address whatever revolutionary technology developments are on the horizon.
What international developments will have an impact on the profession?
Mandatory audit firm rotation is a good example of a development that began at the international level and has had a potential impact in the United States. One of our main concerns is that, in this country, its effect won’t be limited to listed companies but will also cascade to private companies and not-for-profits. The discussion of this issue alone has already had implications in the marketplace, in businesses and on the audit function here in the United States. Elsewhere, we hope the Securities and Exchange Commission will provide some clarity on incorporation of International Financial Reporting Standards in 2013.
CPA firms continue to be affected by globalization. The growth of international networks involves a broad spectrum of firms, from the top 20 to the top 500. The networks are offering these firms greater global connectivity and better opportunities to serve clients in the global marketplace.
We’re reinforcing the profession outside of the U.S. as well. The CGMA designation requires a common skill set that makes a CPA’s expertise easier to transport across borders. The CPA Exam is offered internationally, with our partners at the National Association of State Boards of Accountancy, to expand recognition and awareness of its value. CPAs continue to take on highly visible roles on international issues. Olivia Kirtley, for example, a former AICPA chairman, is now deputy president of the International Federation of Accountants and will become president in two years. Bob Bunting, another former AICPA chairman, has also recently served in this role.
What are we doing to advance management accounting, both in the United States and internationally?
The CGMA designation was designed to enable CPAs to play a strategic role in helping companies address a wide variety of risks and opportunities. It is a global partnership with the Chartered Institute of Management Accountants because business finance is international and, because of the Internet, virtually every business is international.
We are advancing the CGMA designation by building competency models and providing resources that elevate the CGMA holder’s skills not just at the outset, but throughout their careers. On the advocacy side, we’re promoting recognition of the importance of the management accounting function. We are convinced that organizations that have CGMA designation holders on staff—people who approach the finance function in a strategic, integrated, ethical way—are more successful. The CGMA holders make a direct contribution to the improvement of those organizations, and that's an important global objective.
The CGMA designation has been tremendously well-received in a very short period of time, but it is still in its infancy. We have a very detailed success strategy, based in part on feedback from focus groups and research. I think we can expect to continue to see the CGMA designation embraced internationally.
What other important challenges will the profession face in 2013 and what opportunities do you see in them?
The 2008 financial crisis and its aftermath have underscored our global economic interdependency and how problems on one continent can affect businesses and business confidence around the world. In this fast-moving environment, our challenge will be to embrace new roles rapidly. However, I think the profession is involved in many areas that can contribute to greater business confidence and underscore our role as independent auditors protecting the public and, where nonattest services are involved, as trusted business advisors to clients. Firms might consider expanding their assurance services, such as Service Organization Control reporting, sustainability reporting and IT consulting, including cyber security and Big Data.
Regarding advocacy efforts, the AICPA will continue to serve as a resource and voice on behalf of members and the public on legislative and regulatory matters, such as tax reform. There’s no question that 2013 will be a year of intense political debate, whether we’re talking about taxes, business regulation or implementation of existing legislation. The resulting political and economic uncertainty will have an effect on business confidence around the world. The profession is in a position to mitigate that uncertainty on many different fronts. Our support of nonpartisan initiatives to reduce the nation’s debt is one effort to tackle a significant concern and thereby instill greater confidence in future business decision making.
Human capital considerations will remain a constant concern. We’re once again seeing turnover in the profession, and some people are moving into other fields. As employers, CPAs must be sure to create environments that attract and retain the finest people and encourage them to work at the best of their abilities. I think the profession is very well suited to meet all of these challenges because the work we do allows for great flexibility on many levels.
In the end, I’d have to emphasize that our strong ethics and the high quality of our competencies are two very important calling cards for our profession. Our future achievements will depend in large part on how well we deliver on those hallmarks of our profession. These hallmarks will enable us to meet the challenges of 2013 and beyond, whatever they may be.