The American Institute of CPAs has a number of high-profile items on the agenda for its Spring Meeting of Council next week, including re-evaluating its recognition of the International Accounting Standards Board as a standard-setter, changing the definition of attest services and globalizing more of its credentials.
In terms of the IASB, a background document sent to Council members last week noted that the AICPA Council voted in May 2008 to designate the IASB as a body to establish professional standards with respect to international financial accounting and reporting principles. However, the Council also resolved at that time that it would re-assess in three to five years whether continued recognition of the IASB was appropriate. With the end of the five-year reassessment period approaching this month, the AICPA staff wants Council members to decide whether they should continue to designate the IASB as a body to establish accounting principles.
Last July, the SEC issued its final staff report on the IFRS work plan, but the report did not provide a recommendation on whether to incorporate IFRS into the U.S. financial reporting system, the AICPA background document pointed out. In addition, newly appointed SEC chair Mary Jo White has indicated that her early priories include completing the rulemaking mandates contained in the Dodd-Frank Act and JOBS Act and strengthening the enforcement function of the SEC.
“No mention of IFRS or other accounting-related matters as priorities has been made,” said the briefing document. “Given immediate priorities at the SEC, changes in SEC personnel and the lack of direction provided in the final staff report, the future of IFRS in the U.S. remains uncertain.”
Given the current state of uncertainty, the AICPA staff has opted for an “iterative approval process” and recommends that the AICPA Board and Council recognize the IASB as an accounting standard-setter for international financial accounting and reporting principles subject to re-assessment, no sooner than in three years but no later than in five years.
The advantages of this approach include the following, according to the AICPA: “It would avoid creating tension with the SEC and the newly appointed SEC Chair. It would avoid creating unnecessary tensions with the FASB. It would remain faithful to the Council-approved criteria (the IASB currently does not meet the domain & authority criterion). The AICPA could potentially retain leverage with the IFRS Foundation/IASB. The AICPA would retain the option of derecognizing the IASB as a standard setter if later events dictate that necessity.”
Another item on the agenda is the definition of attest. In a background document explaining the proposed changes, the AICPA staff noted that attest services, as defined in the Uniform Accountancy Act, are unique among those services provided by CPAs, due to the fact that they are services that may only be provided by licensed CPAs who are operating within a licensed CPA firm.
However, despite the carefully targeted focus in the UAA on the definition of attest, the scope of what is covered by the definition can change unintentionally through a change in the referenced standards, the AICPA noted.
That is what happened when SAS 70, Reporting on Controls at a Service Organization, was rewritten and reissued as SSAE 16 two years ago. The change moved Reporting on Controls at a Service Organization out of the covered services under the UAA’s definition of attest, since only examinations of prospective financial information are currently covered services under SSAEs.
The AICPA also sees a larger need to revisit the matter of what attest services cover. “Historically, attest/assurance services have been generally limited to audits and reviews of historical financial statements on the basis of an audit performed in accordance with SAS or a review performed in accordance with SSARS,” said the AICPA background document. “However, CPAs increasingly have been requested to provide, and have been providing, attestation services on representations other than historical financial statements. The marketplace and needs of clients have been changing. In responding to these needs, CPAs have been able to apply the basic concepts underlying audit and review to these assurance services. Consequently, the main objective of the AICPA in promulgating the attestation standards (i.e., SSAEs) and the related interpretive guidance has been to provide a general framework for, and set appropriate boundaries around, the attest function. As such, the standards and interpretative guidance (a) provide useful and necessary guidance to CPAs engaged to perform new and evolving attest services, and (b) guide AICPA standard-setting bodies in establishing, if deemed necessary, future standards for such services.”
Given the scope of these attestation services, the AICPA pointed out that it raises a legitimate public policy question as to whether a non-CPA can appropriately apply AICPA standards in providing these services. “Because the attestation standards are a natural extension of the ten generally accepted auditing standards, they similarly require the need for technical competence, independence in fact and appearance, objectivity and integrity, due professional care, adequate planning and supervision, sufficient evidence, appropriate reporting, and the application of professional judgment, all of which are unique hallmarks of a CPA,” said the AICPA background document. “Such standards apply to a growing array of attest services, and have been developed to be responsive to a changing environment and the demands of society."
The AICPA board is recommending that the AICPA Council pass a resolution to support changes to the definition of attest. The Joint UAA Committee, which includes volunteers from the AICPA and the National Association of State Boards of Accountancy, will propose changes and seek public comment on potential legislative amendments to the definition of attest in the UAA. The Joint UAA Committee would then send the draft language on the matter to the AICPA and NASBA boards of directors, who would then vote to put the language out for public exposure and comment. At the end of the public comment period, the Joint UAA Committee would consider all the feedback and incorporate appropriate changes into its proposal. It would then send a final version of the proposed attest language back to the AICPA and NASBA boards for approval. Once the two boards voted to approve it, the new attest language would become the official language of the UAA. State CPA societies, state boards of accountancy and other stakeholders in the profession would then be asked to work with their state legislatures to amend their state accountancy laws.
A third major item on the AICPA Spring Council agenda is the expansion of the AICPA’s internationalization efforts. Last year, the AICPA and the London-based Chartered Institute of Management Accountants introduced the Chartered Global Management Accountant designation as a joint venture between the two organizations (see AICPA and CIMA Launch CGMA Management Accounting Designation). The AICPA plans to expand its international partnerships, both with CIMA and the AICPA’s neighbor to the north, CPA Canada.
“Recognizing the growing demand for specializations both domestically and globally, the AICPA is considering offering existing credentials in the international marketplace, as a natural extension to its existing international strategy and to capitalize on our success with CGMA and current globalizing trends,” said the AICPA in a background document.
At a Regional Council Meeting in March, AICPA chairman Richard Caturano and AICPA senior vice president and COO Anthony Pugliese discussed a number of opportunities for global credentials for specialized accounting services. They noted that CPAs today hold more than 60,000 specialization designations, but with more U.S.-based credentialing organizations offering their designations globally, the AICPA’s market share is less than 25 percent.
“In the interest of striving to meet the public interest and maintain the CPA’s premier positioning, we are looking at ways to expand specialization services domestically and internationally,” the AICPA said. “One notable trend is CPAs choosing credentials granted by organizations that do not recognize or support affiliation with the state societies or the AICPA and don’t drive positive positioning of the CPA.”
They noted that clients and employers are increasingly asking for specialized skill sets, and the AICPA is exploring ways to partner with state societies to expand credential awareness in the U.S.
During the March Regional Council Meeting, AICPA Council members were surveyed at their tables about expanding credentials internationally. The poll indicated that 73 percent of the respondents felt that globalizing credentials is a very important initiative the AICPA should begin offering immediately, while 17 percent of the responses stated that offering credentials globally is very important but won’t immediately impact the profession. The remaining 10 percent did not feel that international credentials are important for the AICPA. When asked whether they agreed that the Council should authorize the AICPA Board to offer credentials outside of the U.S., with CPA Canada and CIMA being the pilot, 88 percent of the tables at the Regional Council meeting supported moving forward with the pilot.
Assuming the pilot goes forward with CPA Canada and CIMA, all of the responding tables agreed that continued exploration of pathways to the credentials is important. The most important consideration in alternative paths, they felt, was maintaining high quality and rigor around the credentials, and supporting the positioning of the CPA.