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AICPA President & CEO Highlights Profession’s Successes and Future

BarryAICPA President and CEO Barry Melancon, CPA, CGMA, reflects on the accounting profession’s successes in 2015 and highlights how the profession will continue to adapt to today’s changing environment. Citing initiatives to drive quality; support CPAs’ services in accounting, auditing and tax; and boost the CPA pipeline, Melancon sees a strong profession shaping its opportunities for future success.

1) What were the profession’s most significant accomplishments this year?

The profession enjoyed another tremendous year of achievements on many important fronts. I think the growth and retention of our membership is the best evidence of that, and now we are the professional home for more than 412,000 members. Our membership is broad in scope, with members working in many different types of environments. Whether in public accounting, management accounting, government, education or another area, they all see the value in our efforts to support the CPA reputation and market position, help firms and organizations drive success and advance the profession for the future.

A common thread for all members is our advocacy function, so I will focus on some of the victories we had this year. After a decade of advocacy work, legislation changing due dates for certain tax returns finally passed – putting the filing deadlines in a more logical flow starting with the 2017 filing season. “Repair regulations” relief came through in 2015 as well, although later than we would have liked. However, those regulations are critical in protecting the profession and small businesses from burdensome recordkeeping and compliance requirements regarding capitalization and tangible property depreciation. Along with that, in late November the Internal Revenue Service raised the tangible property de minimus safe harbor from $500 to $2,500 – which was our recommendation. We also continue to work on tax return preparer regulation with the IRS and Congress, and are moving forward with our lawsuit to make sure the IRS promulgates only appropriate and necessary regulations for paid tax return practitioners. Support for mobile workforce legislation is at a historic high; there are 132 bipartisan cosponsors of the bill. This legislation is important in that it will simplify tax issues for firms and businesses with employees working in states outside of the primary state for fewer than 30 days. And, of course, we are a resource for Congress regarding other tax issues, such as extenders, tax reform, disaster relief and a host of other legislative measures affecting tax preparers and taxpayers alike.

At the state level, we are working with the state societies to urge more legislatures to adopt the Uniform Accountancy Act’s new definition of attest, which says that only licensed CPAs in licensed accounting firms may use the profession’s standards.

We remain as committed as ever to our advocacy activities. Many of the issues the profession is involved in span several sessions of Congress. Legislation is not a fast process but we know perseverance is key. Collaboration with the state societies is another key component of achieving positive outcomes on numerous issues.

2) Is the profession making progress on enhancing audit quality? 

Audit quality has always been a CPA profession imperative, and that must continue. The audit stands at the core of CPA services that protect the public interest. Still, increased complexity in the business environment and the web of regulations presents challenges for firms as they work to maintain high-quality audits for private entities.

Our Enhancing Audit Quality initiative launched in 2014 continues our ongoing efforts and is designed to help firms gain the competencies and access the resources necessary to be successful. Under the EAQ initiative this year, we developed a roadmap for integrating quality enhancements into each stage of the audit process. We see this process as a journey, one that’s focused on talent, tools and training. The path, released in the 6-Point Plan to Improve Audits, starts with attracting the best and brightest students to careers in auditing and assurance. It’s very important that we have both quantity and quality to deal with the issues facing businesses and CPAs now and in the future. Then, professional standards and guidance that drive quality behavior must be in place. Those standards and guidance must be supported by tailored and accessible learning that raises competence, or knowing how to apply your knowledge. We also are creating a more robust practice monitoring system that already is better at detecting and remediating quality issues and are working on a future technology-driven process that will alert the firms to potential quality issues.

Protecting the public through the audit begins with our rite of passage for licensure – the Uniform CPA Examination. We have to make sure that the CPA Exam is appropriately testing for the complex situations that newly licensed CPAs now face every day. An extensive research effort to assess knowledge and competency needs provided the basis for the next version of the CPA Exam to increase testing of higher-order skills, such as critical thinking, problem solving, analytical ability and professional skepticism. Those skills are all very important in today’s business landscape, and particularly so for auditing. The next version of the exam will launch in 2017.

I mentioned that we recognize our responsibility to help firms maintain quality, and we’ve developed many new resources to support them. For example, we offer a free practice aid on quality control systems tailored by firm size, and a free and extensive Invigorate the Focus on Quality Toolkit especially useful for smaller firms. We also offered a free webcast focused on quality control that was one of the AICPA’s top 10 webcasts ever hosted, and it served as the basis for free live workshops offered by more than 40 state CPA societies this past summer and fall. We also launched the innovative AICPA | CIMA Competency and Learning website with our joint venture partner, the Chartered Institute of Management Accountants (CIMA), hosted several webcasts on audit quality and developed peer review areas of focus to help firms recognize challenges to audit quality. We have stepped up resources for audits of employee benefit plans and governmental/single audits as well, including certificate programs for these areas early next year. Our ongoing focus on quality drives numerous current projects as well as future initiatives, as we identify emerging trends and services.

3) What should the profession look forward to as far as emerging services? 

New services the profession could provide to employers and clients is such an exciting area and we are putting a lot of focus there. Our profession must continue to evolve – to add value, because the marketplace certainly does and the public demands it.

The AICPA has its sights set on a number of emerging services, but our highest priority is cybersecurity. The global marketplace runs on electronic information, which reinforces the imperative for increased security. We are laser-focused on cybersecurity risk and how the CPA profession can provide value-added services to meet market needs. For decades, the AICPA Assurance Services Executive Committee (ASEC) has been finding opportunities for CPAs to provide control-based assurance services; a recent example is Service Organization Control reports. Services that help businesses mitigate cybersecurity risks are a natural extension of the services that CPAs already provide. The AICPA is developing resources to support CPA practice in this area, including cybersecurity attestation guidance to be released in 2016.  

ASEC is also working on several projects designed to innovate the financial statement audit. The committee continues to release Audit Data Standards to facilitate the acquisition and analysis of client data that enables auditors to dedicate more time on value-added activities related to the audit. In the near term, this means increasing use of automation and analytics in the financial statement audit process, which will be supported by the new audit analytics guidance being developed through a joint project of ASEC and the AICPA Auditing Standards Board. Looking through a longer term lens, ASEC’s groundbreaking work extends to the potential application of continuous monitoring and assurance, helping businesses and their auditors highlight deficiencies and risks in real or near real-time.

Another emerging area is fair value measurement, where the marketplace demands a solution for CPAs and other professionals working in this specialized discipline. The Securities and Exchange Commission and other regulators are concerned about the quality, transparency and consistency of fair value measurements for financial reporting purposes. The AICPA is working with domestic and international organizations to develop rigorous standards for two new fair value measurement credentials, specifically business intangibles and financial instruments. These credentials will launch in 2016.

Complexity of the business landscape also will require firms to evolve their business models to effectively serve clients’ changing needs. Further, by considering the future needs of the marketplace, firm owners can adapt their business models and evaluate how the firm’s offerings can play an instrumental role in attracting and retaining clients. The new PCPS Firm inMotion toolkit provides CPAs with successful ideas, practices and downloadable tools to help in transitioning from a traditional firm model to a newer, more innovative future model.

For CPAs in the corporate environment, a broader skill set is increasingly in demand as opportunities grow for providing employers with a wider range of key services. In addition to possessing fundamental skills in finance and reporting, for example, the evolving CFO often must also have demonstrated skills in corporate strategy, effective communications, collaboration, leadership and succession, to name just a few.

4) How is the profession doing on recruiting new CPAs?

Efforts to recruit future CPAs are very successful. Our latest study, 2015 Trends in the Supply of Accounting Graduates and Demand for Public Accounting Recruits, showed record numbers of accounting enrollments and record hiring of accounting graduates. In fact, we passed the 250,000 threshold of accounting program enrollments for the first time.  

In 2015, we conducted independent research that told us a lot about prospective CPA candidates. This research is helping to shape our recruitment efforts. For example, we learned what influences students to major in accounting, pursue a career in the profession and take the CPA Exam. So, going forward, in addition to our current successful programs, we are enhancing our presence and engagement on college campuses, building a community college initiative and reinforcing our relationships with academics. The research also emphasized the important role firms play by having a pro-CPA culture that encourages their professional staff to sit for the CPA Exam. We’re working with firms to help them best support young accountants in taking the CPA Exam. Each of us can have an impact, and encouragement to take the exam has proven to be the number one factor driving a young professional to pursue the CPA.

I want to add that the profession’s diversity and inclusion activities are important to the overall pipeline. We have to reach out to every corner to capture the interest of the most qualified talent; we need the largest pool of candidates possible to replace retiring Baby Boomers, support the growth and complexity of the profession, and reflect the diversity of society and particularly the diversity of the ownership of entrepreneurial capital. It’s a business imperative for the profession.

5) Could you tell us about the proposal to evolve our joint venture with CIMA?

If you think about what we’ve achieved over the past four years, we've really brought management accounting to a new and different place. It started with the creation of the Chartered Global Management Accountant (CGMA) designation in 2012 to meet a need of members in business and industry – about half of the AICPA’s membership – who wanted a way to demonstrate their advanced proficiency in business. More than 150,000 professionals today hold the CGMA, including more than 50,000 CPAs, making it the most widely held management accounting designation in the world. The AICPA and CIMA have leveraged this network to drive new relationships and research with employers. That’s led to innovations like the CGMA Competency Framework, which identifies the skills management accountants need to be successful today and into the future, and the Global Management Accounting Principles, which define management accounting best practice. The AICPA | CIMA Competency and Learning website provides a new tool for professionals to develop their competencies and skills.

We have an opportunity to build on this success to further strengthen the entire accounting profession – both public and management accounting -- and position it for ongoing relevance amid some disruptive trends and demographic shifts. We are proposing to join forces in way that preserves everything we have today, including the AICPA and our unwavering commitment to the CPA, while creating new opportunities for the future. It’s really the power of ‘and.’ Backed by an expanded joint venture that’s 600,000 strong, members would have an even more influential advocacy voice on critical audit, tax, financial reporting and other business issues. They would gain more international perspective to stay ahead of issues affecting a growing number of their clients and organizations. We encourage members to learn more about this proposal and provide their input; visit www.aicpa.org/horizons for information and a feedback channel.

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