Q&A with Barry Melancon, CPA, CGMA, AICPA President & CEO
What opportunities and challenges does the head of the AICPA foresee for the CPA profession in 2014? What were the profession’s significant achievements in 2013? Barry C. Melancon, CPA, CGMA, AICPA president and CEO, answers these questions and offers insights on how the profession will continue to adapt to today’s changing environment, addressing clients’ and employer’s needs. Citing successes with regulation, legislation, recruitment and positioning the profession for the future, Barry strongly believes CPAs will build on a solid foundation.
1. What were the AICPA’s legislative or regulatory priorities this past year and what’s in store for 2014?
We continued to have success in the advocacy area in 2013. In one significant victory for the profession and the public, the Securities and Exchange Commission exempted CPAs from registration as municipal advisers when they are providing certain accounting or attest services. We urged the SEC to exempt CPAs from the definition of municipal advisers after it had indicated that anyone performing accounting services for governments would be defined as a “municipal adviser.” It was critical that our voices be heard on this issue because such a broad definition would have made it more difficult for CPAs to serve governments and potential investors without taking on unnecessary and duplicative costs or compliance burdens.
Along with state CPA societies and the National Association of State Boards of Accountancy, the AICPA is urging state legislatures to adopt a revised definition of attest in the Uniform Accountancy Act. The AICPA and NASBA released a public exposure draft of new model legislative language earlier this year, and received overwhelmingly positive comments from interested stakeholders. The new proposed definition would revise the current model definition of attest to ensure that only licensed CPAs operating within a licensed CPA firm can issue reports based on the AICPA’s professional standards (that is, statements on standards for attestation engagements). I believe it’s critical that companies and end users of their attested reports have confidence in those performing these services. And CPAs operating within CPA firms are the only practitioners who meet the appropriately high bar of necessary competencies, education, experience and oversight to protect the public interest in this area. The AICPA also has partnered with NASBA to support state CPA societies and state boards of accountancy who may want to approach their state legislatures to inquire about passing a new law to permit CPA firm mobility.
Now I’ll mention a tax situation. When a court decision struck down the Internal Revenue Service’s preparer tax identification number program, members found themselves unable to affix a valid PTIN to their clients’ tax returns. We conferred with the IRS to address our members’ concerns, resulting in the IRS reopening the PTIN system.
Looking ahead, our top legislative and regulatory priorities in 2014 include tax code simplification and mobile workforce legislation. As far as tax reform, the timing is uncertain but it now appears to have pushed out to possibly 2015 for final legislation. Regardless, our tax and congressional affairs teams and volunteer leaders have been and will continue to serve as a resource for members of Congress. On the other hand, mobile workforce legislation is progressing quite well. This legislation would set a national standard for the taxation of employees when performing work outside their home state and reduce related regulatory burdens for businesses that operate interstate. Both the House and Senate have introduced bipartisan bills and we are hopeful this legislation gets signed into law.
2. What do you think about the Public Company Accounting Oversight Board’s proposed changes to the auditor’s report? What other PCAOB developments should we watch?
First, let me highlight two developments with very positive implications: bipartisan passage of a House bill prohibiting the PCAOB from requiring mandatory audit firm rotation and a companion bill that has been introduced in the Senate. These moves signal that mandatory audit firm rotation is less likely to move forward in the U.S. Still, we continue to monitor developments abroad, specifically in the European Union where it has gained some traction.
In regard to changes to the auditor’s report, the Center for Audit Quality, which is affiliated with the AICPA, has called for responsible changes in this area and prepared a comment letter. I’ll summarize it this way. Certain additional information in the auditor’s report may provide value for investors and other financial statement users, and we support that, but the new information has to be seen in the context of increased risk for auditors. I also agree with the investor position that such information should come from company management, with auditors providing assurance on it. In addition, any changes to the process should encompass enhancements to the roles and responsibilities of all parties in the financial reporting system. Overall though, this is a good evolutionary direction.
Lastly, I commend the PCAOB for its foresight to work on an audit standard for revenue recognition. The Financial Accounting Standards Board is expected to release the new, converged revenue recognition standard in the first quarter of 2014. Coordination of accounting and auditing standards is critical to enhancing audit quality.
3. How has the marketplace responded to the Financial Reporting Framework for Small- and Medium-Sized Entities?
The FRF for SMEs framework was the AICPA’s answer to a need in the marketplace and we’re hearing that it has generated a great deal of excitement. Firms have embraced it as a new opportunity to serve clients in their role of trusted business advisers. We know that a number of firms are preparing to roll it out to their clients for 2013 financial statements and have been meeting with lenders. Our targeted ad campaigns to small business owners and financial statement users have been successful as well, based on traffic to our toolkits for those stakeholders.
I want to reiterate that the FRF for SMEs is in the non-GAAP space. In the GAAP arena, we’re pleased that the Financial Accounting Foundation’s Private Company Council has made quick progress in recommending alternatives in GAAP for private companies. In fact, the FASB has endorsed two of the PCC’s proposals already. Many companies need to use U.S. GAAP, and they’ll have the option of applying standards that are less complex and potentially less costly than before, something we certainly support.
4. Can you tell us about the Chartered Global Management Accounting designation and what new developments are on the horizon?
I’m thrilled by how many of our members see the value in the CGMA designation. It’s not even two years old and yet more than 41,000 AICPA members have become designation holders. The CGMA is now the most prominent management accounting credential in the U.S. Globally, including Chartered Institute of Management Accountants members, there are about 140,000 CGMAs.
The program offers extensive resources, tools and reports as well as a robust peer community. Besides building on these important benefits as we go into 2014, we are continuing to develop the exam that will be put in place for new CGMAs starting in January 2015. The exam was planned from the beginning, before the launch, and its development has been ongoing since. It’s a strategic case study exam that further adds to the rigor of the application process.
5. Given the declining youth population and the profession’s need for future CPAs, how is the AICPA addressing human capital issues?
The AICPA recognized the potential pipeline issues years ago as a result of our Vision Project in the 1990s, which was the precursor to the CPA Horizons 2025 project that was completed in 2011. We developed programs that introduce students to the CPA profession and all it has to offer. Our flagship site for college students, ThisWayToCPA.com, was designed to introduce students to the profession and help guide them in becoming CPAs. Replacing the retiring CPAs isn’t enough, though. We also have to train, mentor and advance future CPAs who can lead the profession into the future. The AICPA Leadership Academy, launched in 2009, has graduated 165 future and current leaders. Many of these graduates currently serve on AICPA and state society committees. Our efforts on that front include the AICPA Young CPA Network, a vital community in which young CPAs can exchange ideas and information to gain a richer understanding of the possibilities of their careers.
We’ve also been hard at work to enhance the CPA profession’s diversity, making sure we capture the best minds and the top skills to meet the future needs of our clients, employers and communities. The AICPA National Commission on Diversity and Inclusion is charged with creating resources and tools to help companies strengthen their diversity efforts.
All in all, we’re engaged in a continuing quest to fill the pipeline so we can maintain the high quality for which our profession is known. Each and every one of us is a building block for our profession, and our human capital issues are key to the profession’s success.
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