AICPA President and CEO Looks Ahead to 2015
In an interview with CPA Letter Daily, AICPA President and CEO Barry Melancon, CPA, CGMA, reflects on the accounting profession’s successes in 2014 and discusses the opportunities and challenges of 2015. Below is an excerpt from the interview; for the full interview, watch the accompanying video.
This year the AICPA and profession have focused on a wide range of quality initiatives. The public practice area hinges on quality. Our committees, staff, governing Council and our board have done a great job of addressing new ways to deepen and extend our quality commitment and capturing those issues in a discussion paper published in August. That gave us an extended period to talk about some things that we need to do as a profession to keep our quality commitment at the highest levels. The current effort will obviously carry over into the next year, but we’ve set down a foundation.
When you step back and take a broad view, you see that our profession is really well positioned. For decades we’ve conducted a periodic brand survey of the CPA profession, and the American public’s opinion of CPAs is now at an all-time high.
Finally, we're very proud of the fact that the AICPA’s membership grew to over 400,000 this year. That was a big accomplishment and it’s a reflection of the interest in the profession, how well we carry out our mission, our service to entrepreneurs and our work in protecting the public interest in audits.
2). Where has the profession's legislative and regulatory advocacy been most effective?
We have a long track record of very strong success in Washington, D.C. It’s really a joint effort of the AICPA and state CPA societies.
Once again, we’ve been influential in the passage of certain pieces of legislation. Take the DATA Act, something we’ve been involved with for about five or six years. It begins with XBRL, something that was basically created by the profession. Generally, the Act requires the federal government and all its agencies by 2016 to report financial information in a way that the American public and other interested parties can easily access with machine-adaptable and machine-readable inquiries, enabling them to really understand our federal government from a financial perspective.
We also were actively monitoring numerous developments in the tax area. Identity theft, repair regulations, and Affordable Care Act compliance and forms are among the many issues we are addressing. Regarding issues included in tax reform discussions, on one hand we successfully stopped some proposals that we thought would not produce good outcomes. On the other, we continued to push for several changes that would benefit taxpayers and tax practitioners. Among them are education incentives and automatic disaster relief, and we are still working these recommendations through the process. Regarding the repair regulations issue, in the House we met with the two CPAs in Congress who serve on the House Small Business Committee, Congressman Rice (R-SC) and Congressman Murphy (D-FL), and in the Senate we met with Senator Risch (R-ID) and Senator Heitkamp (D-ND), who serve on the Senate Small Business Committee, to discuss the IRS’s rules that went into effect on January 1, 2014. Both the House and Senate members sent letters to the IRS urging the IRS to make the rules prospective and to increase the de minimus safe harbor threshold to $2,500 for small businesses.
All of us understood that the likelihood of tax reform in this political environment wasn’t high, but we participated aggressively in the process and will continue to do so. We provide valuable input on technical and administrative issues to the House Ways and Means Committee, the Senate Finance Committee and the Internal Revenue Service specifically to try to help focus on tax reform.
We spent a lot of energy fighting a cash basis proposal that emerged as part of a planned tax reform bill that ultimately did not pass. The proposal would have done away with cash basis for professional service entities over a certain size and had the potential to affect firms and other entities that could use cash basis. In the end, a majority of Congress signed a letter saying they did not think that change, whenever tax reform is debated, would be the right thing to do.
3). What are the profession’s top three priorities for 2015?
The quality initiative is going to be one of the top priorities. Over the last five or six years, there has been a litany of efforts to support quality, starting with the audit clarity project and including numerous new resources, such as the Center for Plain English Accounting, as well as our advocacy for differential accounting standards.
The audit quality white paper published in August talks about some near-term changes that will mostly have an impact on peer review and possibly quality control standards. Other quality initiatives will be a continuing process, such as efforts to encourage a greater focus on quality, particularly for work done in the regulated industries, like employee benefit plan and governmental audits.
Later in December, we plan to issue a concept paper that paints a thought-provoking picture of what peer review could evolve into in the 2020s, called “Practice Monitoring of the Future.”
Both of these papers involve change management, so there will be pieces that people like and some they don’t. But I encourage all practitioners to read and comment on them. They are discussion papers, not proposals of standards. Comments will be filtered into the committees, which will bring forth some of the discussion paper items as proposals in a formal fashion in 2015. So, quality is a top priority.
Second is the Chartered Global Management Accountant (CGMA) designation. Today there are about 150,000 CGMAs worldwide, about 49,000 here in the United States. And in 2015, a number of new procedures will be in place – a new exam, new expectations, a new syllabus, new learning tools, a set of principles for management accounting – that are intended to help elevate the function of management accounting globally. It will be fun and exciting to see that effort mature to a different level.
The third is the human capital area. In my travels, I find that everybody’s talking about the need to find and keep the best people, and the many related issues. But let me make the point that maybe is the most important one right now.
We have had about six consecutive years of record numbers of people majoring in accounting. That’s a great thing. For the last three years, however, we’ve basically had a level number of people taking the CPA exam. So there is a gap that’s building.
A major research project under way will help us to better understand that development. We want to find out what’s causing people to sit or not sit for the exam and then design tactics to deal with it strategically. The results will help us design and implement tactics to reverse the trend. That will involve the AICPA as well as state societies, firms themselves and management accounting functions or finance functions in business.
4). Why are diversity and inclusion initiatives so important for the profession?
Diversity is critically important. I would ask you to think about it from a business perspective.
The fact is we have not done a good job of bringing different ethnic groups into the profession. We could also talk about women in the profession, and there are some good stories there, and some work that needs to be done.
If you look at society as a whole, America truly is a melting pot. In less than two decades, there will not be a majority of any background in this country. That means that entrepreneurism is increasingly going to be owned by a more diverse population of Americans. If, as a profession, we want to serve entrepreneurs for the next 10, 20 or 50 years, we need to reflect and look like the people who own entrepreneurial capital. Today, if you look at the data, there is a huge gap between the makeup of our profession and of our society and entrepreneurs. That is going to continue to grow, so there’s a business imperative to find ways to be a profession that is inclusive.
The fact of the matter is, if you compare our profession to the other professions on almost any measure – attractiveness, how we look at the future – we’re going to stack up very, very well. But diversity is one area where we wouldn’t stack up well. And we think it’s strategically important for us to embrace that so that when we sit here in the future our dynamic profession will reflect the demographic realities of society.
To see the full interview, including Melancon’s thoughts on technology implications, the AICPA’s human capital initiatives and the one thing he wishes members knew about the AICPA, watch the video.