Forging Ahead in Complex Times
1) What do you see as the profession’s most significant accomplishments in 2016?
One of the things that has made our profession so strong and vibrant is our willingness to embrace change and adapt to meet evolving needs of the clients and businesses we serve. Today, change is happening at unprecedented speed and fundamentally reshaping the environment where we operate. That means we have to move faster, look farther down the road and over new horizons to anticipate and get ahead of what’s coming next.
We have met that challenge head on, and I would say that is our most important achievement this year. There are numerous examples – the effort to seize new technologies to evolve audit for the future. The work in cybersecurity to create a consistent approach to examination and report on an organization’s safeguards. The new version of the Uniform CPA Exam, which goes live in April 2017 and tests higher order cognitive skills. The launch of RIVIO clearinghouse, which transforms how private company information is exchanged. Our thought leadership and work with employers through the CGMA program to elevate quality in management accounting. And the new international association that members of the AICPA and The Chartered Institute of Management Accountants approved last spring will provide a broader and more powerful platform to advance public and management accounting around the world.
All of this work is critical to our ongoing relevance and our strong reputation as a beacon of insight and trust in a volatile, complex world. It keeps us moving along a path of progress.
Quality is absolutely core to our profession. It’s vital that we constantly and consistently meet the highest benchmark – and challenge ourselves to evolve and improve as we adapt our services to ever-changing needs of the market.
As part of our Enhancing Audit Quality Initiative, we introduced a 6-point plan, which serves as a roadmap for the auditor’s journey to excellence in a constantly changing world. In the first year, we’ve made headway through a number of initiatives, including new quality control tools and resources, enhancements to the peer review program and new industry-specific training programs focused on competency development.
We’re also working to help support enhanced audit quality by facilitating greater use of data analytics in the financial statement audit. The AICPA and Rutgers Business School have partnered on a research initiative aimed at further integrating data analytics into the audit process and demonstrating how this can lead to advancements in auditing. In addition, the AICPA Auditing Standards Board and Assurance Services Executive Committee are working on several projects to develop guidance and tools for audit data analytics, which will be released next year.
In management accounting, we also have considerable efforts underway. You might remember that a couple of years ago, together with CIMA, we released a set of Global Management Accounting Principles, which established a benchmark for best practice within an area that, historically, has not had a lot of uniformity around the world. We’ve seen strong reception for the principles and over the next year will introduce new tools and resources to facilitate broader adoption.
Next year we’ll also broaden access to our CGMA designation within the U.S. The AICPA governing Council directed us to expand access in response to growing demand from employers for the skills and quality it represents. We’ll share more about this project in the coming months.
When we talk about quality we also have to be mindful of standards changes and evolution. The Auditing Standards Board and the Accounting and Review Services Committee had full agendas in 2016, working to evolve standards to reflect current service needs and public expectations. Their agendas will continue in 2017.
FASB also introduced new accounting standards this year. CPAs must stay abreast of the revisions, particularly in the areas of revenue recognition and leases, where changes are significant. In fact, our Financial Reporting Executive Committee (FinREC) has undertaken its most massive effort ever to help entities implement the new revenue recognition standard.
And we remained focused on our efforts to advocate for differences in GAAP for private companies, where warranted. This year, Candy Wright was appointed Chair of the Private Company Council (PCC), and new members were named to both FASB and the PCC.
3) What’s happening on the advocacy front, and what can we expect in 2017?
We’ve made progress this year in many areas. Working with state CPA societies, who are tremendous partners on advocacy, we have achieved mobility privileges for individuals in 52 states and jurisdictions. This allows CPAs to offer services across state lines without having to register in every state in which they provide those services. Now, we are working to expand those privileges to CPA firms. Nationwide, 16 states allow out-of-state firms to cross state lines and offer services without registration with the state. More legislatures are looking to adopt CPA firm mobility privileges next year.
We are seeing results in the attestation area, as well, with 38 states now having passed a comprehensive definition of attest. This provides the public confidence that the reports issued meet our profession’s high quality standards. And we are working closely with state societies, firms and other stakeholders to combat potential legislation that could have significant negative implications, such as tax on professional services or the ability for regulatory board members to be personally sued for actions taken during their service.
Given the outcome of the presidential and congressional elections, it’s difficult to predict with any degree of certainty what we will see come out of Washington in 2017. But we do know that President-elect Trump and leaders of the House and Senate have identified tax reform and repeal of the Affordable Care Act as being among their top priorities. Specifically, as it relates to tax reform, we have for many years commented that major tax reform, despite a lot of talk, was not likely to pass. However, as we move into 2017, I think it is safe to say this is the highest probability for major tax reform since the 1986 tax act. Other areas of focus could include an overhaul of Dodd-Frank and renegotiation of existing trade policies. We will continue working closely with legislators, including the 10 CPAs in the House and 2 accountants in the Senate, to make sure policy changes are in the public interest.
4) What services do you think clients and businesses will be looking for next year?
As client and business needs evolve, CPAs have a significant opportunity to broaden their offerings to add value in a number of emerging service areas. I would highlight three that I’ve had quite a few discussions about recently.
The first is cybersecurity. By 2020, there will be an estimated 50 billion smart devices connected to the Internet. That proliferation of connections creates increased cybersecurity risks that can have significant financial and reputational implications. CPAs - whether they work in public accounting or business and industry - are uniquely qualified to lead in this area.
Early next year, the AICPA’s Assurance Services Executive Committee (ASEC) will release guidance that CPAs in public practice can use in cybersecurity attestation engagements and those in business can use to effectively communicate their organization’s cybersecurity efforts. In addition, the AICPA is updating its Service Organization Controls (SOC) guidance (SOC®) and SOC2®) to reflect the expertise needed as businesses increasingly use outsourced services, such as cloud computing or employee benefit plan administration.
The second area I would highlight is in corporate reporting. More organizations are moving toward Integrated Reporting (IR) to give investors a more comprehensive picture of their overall health. CPAs should be on the front lines, embracing IR to provide more transparency and insight that benefits the public interest.
In addition, with accounting standards like leases and revenue recognition going into effect in the coming years, now is the perfect time for CPAs to encourage their small business clients who are not required to use GAAP to consider using the Financial Reporting Framework for Small- and Medium-Sized Entities. The framework presents a real opportunity for practitioners to help business owners provide lenders a consistent, concise and comprehensive picture of the business’s finances.
The final area I would highlight is personal financial planning. Increasingly, consumers are looking for holistic financial advice – help navigating everything from taxes to estate, retirement, investments and risk management planning. CPAs have the expertise and skills to serve as that trusted advisor and the opportunity to integrate financial planning services into their practices to meet this growing client need. The AICPA has a number of tools to help.
5) What progress are we making in attracting the next generation?
The future of our profession relies on our ability to maintain a robust pipeline of the best and brightest talent. The AICPA, state societies, universities and firms are working together on several initiatives designed to continuously engage prospective candidates throughout their journey from the classroom to CPA licensure.
This year, for example, the AICPA and seven state CPA societies piloted a new joint student recruitment program that so far has recruited more than 1,400 new student members. We also worked with state CPA societies to train 71 high school teachers on how to teach higher order accounting and expanded the Accounting Pilot & Bridge Project program. To further increase our presence on campus we launched an Academic Champions program with 18 pilot campuses. Finally, we re-launched the Accounting Doctoral Scholars program that helps CPA practitioners transition into academia where they can influence the next generation. To date the program has helped more than 100 CPAs with practical work experience complete Ph.D. programs and become accounting professors.
Firms and employers also play a key role by establishing a supportive environment that encourages professionals to pursue their CPA license. We recently completed research with young professionals within firms and those who have left to understand their needs and perspectives. It will influence development of tools and resources that firms can use to provide the supportive environment CPA Exam candidates need to succeed.
Attracting the right talent is only part of the equation. We also must equip young professionals with the skills and expertise they need to meet the needs of the clients and businesses they serve. In April, we will launch the next version of the CPA Exam, which will place a greater emphasis on testing candidates’ higher-order skills, such as critical thinking and analytical ability that are necessary in today’s environment. In addition, we’re conducting research with NASBA into why candidates drop out of the testing process and candidate pipeline, and we’re working with NASBA and state boards to address some of the processes to take the exam as we continually strive to align test taking rules with the habits and expectations of the next generation.
Building on the insights from our Future of Learning initiative, we are driving innovation in learning as well. We continue to expand the AICPA | CIMA Competency and Learning web site that helps CPAs and CGMA designation holders identify gaps in their knowledge and provides tailored resources to develop necessary competencies. There’s also exciting work underway to incorporate new technologies into learning through the use of gamification, mock online classrooms and even virtual reality, which will be even more important as Generation Z – a group that has only known a world with the Internet, social media and connected devices at every turn – follows the Millennials into the workforce.
6) Can you update us on the progress to establish the new international accounting association with The Chartered Institute of Management Accountants?
We’ve been hard at work since June, when AICPA and CIMA members approved the creation of the association to advance public and management accounting around the world. We’ve integrated AICPA and CIMA operations as proposed to form the Association of International Certified Professional Accountants (“the Association”), which will begin to supplement the benefits AICPA and CIMA members receive next year.
Representing 650,000 members and students, the Association will provide a powerful platform to raise awareness of the profession and the CPA and CGMA designations globally, increase the profession’s influence through advocacy and drive new resources and insight that help members stay ahead of client and business needs. Stay tuned for more details in the New Year.
7) Any final thoughts?
In the past year we’ve taken bold steps in a number of areas and we must maintain that momentum. We have to keep looking ahead and find ways to continue advancing the profession. I’m looking forward to our future – to the opportunity to initiate change and address a fast-changing and dramatically evolving world where the accounting profession is truly indispensable.