1987: A Tough EntranceIt was not, perhaps, the best of times for the accounting profession: Scandals, including the implosion that summer of the brazenly fraudulent ZZZZ Best, had tarnished auditors' reputations, malpractice insurance rates were soaring, college students were staying away in droves, and the Federal Trade Commission claimed that the American Institute of CPAs' rules on professional activities violated restraint-of-trade rules.
It wasn't the worst of times, though: Accountants were kept busy dealing with the provisions of the landmark Tax Reform Act of 1986 (including many companies' rush to convert to S corporation status); the Treadway Commission offered its report on ways to prevent fraud; and the Public Oversight Board reported that less than 1 percent of audits conducted the year before were substandard. Under then-president Philip Chenok, the AICPA celebrated its 100th anniversary with a gala event, and also introduced the Personal Financial Specialist credential, just as Price Waterhouse became the first of the Big Eight to register an investment affiliate with the Securities and Exchange Commission (though some smaller firms, like Seidman & Seidman and McGladrey, Hendrickson & Pullen, had already done so).
Recruiters from PW were offering starting salaries up 20 percent on the year before - to a princely $29,000; Arthur Young reported that it had a record 30 women partners - out of a total of 800; and Klynveld Main Goerdeler and Peat Marwick merged to form KPMG, rounding out the then-Big Eight.
Technology had already begun to change everyday practice, and 1987 saw the release of an eight-module accounting package from Peachtree, MAS 90 Job Cost software from State of the Art, BusinessVision accounting software, and Act! for contact management. Apple was still a major player in business software, and a company called Amstrad introduced a revolutionary "laptop" computer that operated on batteries - C batteries. Ten of them.
Into this brave new world, with impeccable timing, Accounting Today was launched on Oct. 12 - exactly seven days before the "Black Monday" crash saw the second largest one-day stock market decline to date.
1988: Making Changes
With congressional hearings excoriating accountants for recent scandals, the AICPA moved to burnish the profession's image by approving a 150-hour education requirement for new members after 2000 and a bylaw making peer review mandatory (sparking a lawsuit by dissident members over alleged ballot improprieties), and launching its first nationwide ad campaign. In response to the FTC's ongoing complaints, the institute also voted to lift bans on CPAs receiving commissions and contingency fees. * Practitioners struggled with entry-level recruits who refused to work long hours and "waste their first two years doing menial jobs," and Andersen split up its audit and consulting units to form Arthur Andersen and Andersen Consulting.
* The Association of Certified Fraud Examiners is founded.
* Lacerte introduces remote-entry processing, so practitioners can prepare tax returns at home.
* Tech guru Gary Boomer predicts that firms will quadruple their tech spending by 1990 - to around $8,000 each.
1989: From Big Eight to ...
CPAs CAME under fire for the savings and loan crisis, but the big events of the year were the mergers of Ernst & Whinney and Arthur Young, and of Touche Ross and Deloitte Haskins & Sells - reducing the Big Eight to the Big Six - and the serious merger talks between Andersen and Price Waterhouse, which didn't pan out. * Industry opposition forced FASB to postpone a long-expected standard on accounting for income taxes, and only a retreat in the face of a struggle with state and local governments saved the five-year-old Governmental Accounting Standards Board from an existential crisis. * Service troubles and the eventual collapse of a major tax service bureau led many CPAs to reconsider the way they prepared returns - though they were utterly unenthused about the IRS's fledgling electronic filing program.
* Tax experts predict that the alternative minimum tax will be one of the big issues of 1990.
* Videotape sweeps the CPE world.
* The precursor of the Association for Accounting Marketing is founded.
1990: 'Exciting Times'
The looming recession hit CPAs hard, to say nothing of a slew of lawsuits from the Federal Savings & Loan Insurance Corp., but the most unsettling events of 1990 were the unexpected bankruptcy late in the year of the seventh largest accounting firm, Laventhol & Horwath, and the dissolution of the 15th largest, Spicer & Oppenheim. * Tax service bureaus also struggled, as firms brought tax prep in-house and found they liked it. * FASB decided after some debate to require a supermajority for decisions. * An AICPA survey revealed that women made up the majority of accounting graduates for the first time, even as PW lost a landmark sexual discrimination case for not making a woman a partner.
* The SEC allows Andersen Consulting to provide services to Arthur Andersen audit clients.
* The Federal Accounting Standards Advisory Board is created.
* Windows 3.0 is released.
A suffering economy - particularly when combined with large settlements for S&L cases - hit firms hard, hammering staff numbers and salaries, with fewer job offers for accounting graduates, even as the National Association of State Boards of Accountancy reported a decline in CPA Exam takers, and a record number flunking. * In the ongoing battle over commissions, the AICPA Council voted strongly against them, but in favor of dropping bans on different ownership formats, and of allowing non-CPAs as members.
* American Express opens 24 tax and bookkeeping offices.
* The IRS unveiled its modernization program.
* The National Association of Certified Valuation Analysts is founded.
* CCH launches ProSystem fx.
* CD-ROM tax research systems gain in popularity.
1992: Dark Before Dawn
Tough times bred flat salaries and staff cuts (AT estimated the Big Six might cut as many as 80,000 positions), as well as a wave of audit litigation, though firms like Coopers & Lybrand and BDO Seidman fought back with countersuits. * Firms shuddered when Pannell Kerr Forster broke up into individual companies to avoid the liability issues that had hit Laventhol partners. * The Committee of Sponsoring Organizations of the Treadway Commission issued its landmark report on internal controls. * The IRS hit 10 million e-filed returns and announced plans to tackle the $100 million "tax gap," and tax practitioners continued to move tax prep in-house, leaving tax processing centers to disappear.
* The IRS launches TeleFile.
* Intuit releases QuickBooks, and Creative Solutions releases UltraTax.
* Rick Telberg becomes editor of Accounting Today.
Things looked better in 1993: The Supreme Court struck down a Florida rule against soliciting clients, freeing CPAs to market themselves like the rest of the world. * Tax law changes and the aging of the Baby Boomers sparked a resurgence in PFP practices, and hiring of new graduates picked up after two years of declines. * An AICPA study found that minority graduates now accounted for 12 percent of all new hires. Women, however, were still only 4.9 percent of partners at the top 16 firms. * The 150-hour rule marched on, despite some setbacks, with 30 states passing it by mid-year.
* Jackson Hewitt and Intuit go public.
* Deloitte & Touche is one of the first firms to launch a women's initiative.
* E-mail begins to make its way into offices.
* AT launches a new look, new logo and full color - and is bought by Faulkner & Gray.
1994: What's in a Name?
Exactly who could call themselves an accountant or a CPA was the question this year: Court cases around the country revolved around non-CPAs' right to call themselves accountants, and CPAs at non-CPA firms (like AmEx) being able to hold out as such. Meanwhile, the AICPA Council voted to allow non-CPA partners at CPA firms. And when New York allowed accountants to form LLPs in July, the Big Six all raced to re-organize there to limit liability. * There were fireworks over FASB's stock options proposal, and it was eventually watered down as the board saw donations from industry declining. * Microsoft proposed buying Intuit for $1.5 billion, but the deal fell through in 1995 over regulatory hurdles.
* David Costello becomes CEO of NASBA.
* 1993-1994 sees the most accounting degrees granted in a decade.
* Cyma launches Cyma IV.
* AT publishes its first Top 100 Most Influential People roster.
1995: AmEx Ascendant
The newly renamed American Express Tax and Business Services continued its push for recognition, winning major victories in Florida and Texas (where the state board eventually had to redefine "public accountancy" in its favor). * Barry Melancon took over as chief of the AICPA at the same time as the institute launched its grassroots CPA Vision Project and its "Never Underestimate the Value" ad campaign. Melancon swept in and shook things up, slimming its executive and director ranks and creating four new operating groups. * FASB finally issued its compromise stock option plan, with expenses noted in footnotes. * The IRS went through a "filing season from Hell," with millions of refunds delayed and a 16 percent decline in e-filing. * The Big Five saw their fastest growth in years, with consulting the driving force, as PW abandoned "up-or-out" partnership tracks for its consultants.
* Microsoft releases Windows 95.
* Wolters Kluwer agrees to buy CCH for $1.9 billion.
* Accounting Today asks, with touching naiveté, "Will the Internet affect accounting firms?"
1996: Building Momentum
Consulting drove high growth rates at the Big Five, and for the first time supplied more of the Top 100's revenue than audit or tax work, helped along by a wave of IPOs. With many states easing their bans on commissions, more and more firms surged into financial planning. * Under new CEO Melancon, the AICPA was extremely busy, proposing a national CPA certificate, announcing aggressive plans to market everything from software to seminars, approving the new Accredited in Business Valuation credential, and floating ideas for six new assurance services. * The flat tax continued to fascinate many, even as Congress gutted the IRS's modernization plan and cut its budget. Only a last-minute reprieve prevented massive IRS layoffs.
* The AICPA reports that, for the first time, more of its members work in industry than in public accounting firms.
* Firms are warned to get online or get left behind.
* Intuit announces the impending launch of its QuickBooks Pro Advisor program late in the year.
1997: From Big Six to ...
Firms had plenty of business (revenues at the Top 100 grew by an astonishing 21 percent), but the big events were the announced mergers of Price Waterhouse and Coopers & Lybrand, and Ernst & Young and KPMG - though the latter would be scotched in early 1998. * Warring over the phrase "fee-only" embroiled financial planners all year long, pitting the National Association of Personal Financial Advisors against the AICPA. Meanwhile, the institute and the SEC agreed to form the Independence Standards Board. * Charles Rossotti came aboard at an IRS that was being roasted on TV and in Congress for taxpayer abuse and intimidation, with various plans for restructuring floating around the Hill and the Clinton administration. * At the end of the year, Andersen Consulting finally voted to divorce itself from Andersen Worldwide; the ugly divorce went to arbitration.
* RIA rolls out its CheckPoint online research platform, and CCH its Internet Tax Research Network, while MicroVision launches Accountant's Relief.
* Gary Boomer sets up Boomer Consulting.
1998: The Year of the Roll-Up
Consolidators dominated the landscape; roll-ups like Century Business Services, H&R Block and old hand AmEx made hundreds of millions of dollars worth of acquisitions, with a new deal seemingly announced every week. * All of that activity somewhat overshadowed a growing list of scandals at Cendant, Livent, Sunbeam and Oxford Health Care. * The AICPA reported the results of its Grassroots Vision Project, with a focus on new market-based (not regulation-based) services, and technology competence. * It was a hard year for the IRS, with televised hearings of taxpayer horror stories, and the passage of a sweeping reform law that included a target of 80 percent e-filing by 2007. * Despite Top 100 revenues that were growing 26 percent, firms everywhere worried about seriously declining audit prices, technological change and staff shortages.
* Consolidation sweeps vendors, too, highlighted by RIA buying CLR/Fast-Tax, Sage agreeing to buy State of the Art, and Intuit acquiring Lacerte.
* FASB celebrates its 25th anniversary.
* David Walker becomes Comptroller General.
1999: The Y2k Boom
The Y2k bug created a boom for accountants and consultants working to make sure the world's computers didn't crash at the stroke of midnight. (It also gave a big boost to the outsourcing industry, particularly in India.) * A growing chorus, including Warren Buffett and the SEC, questioned the independence of auditors and the quality of their audits. * Consolidation slowed, though H&R Block picked up McGladrey & Pullen for $240 million over four years, and router giant Cisco bought 20 percent of KPMG Consulting for $1 billion, as the Big Five firm prepared the unit for an IPO.
* E-filing accounts for 21 million returns.
* A host of online accounting vendors, including NetLedger and
Intacct, launch this year and early next, and MicroVision launches online accounting portal AccountantsWorld.
* The AICPA teams up with the Big Five and others to begin developing what will become XBRL.
* 18 large firms form the Leading Edge alliance.
The AICPA dominated the news with two controversial plans: one for CPA2Biz, a for-profit online portal for accountants, and the other for a global business designation originally known as "XYZ" but later given the much-mocked name "Cognitor." * SEC chair Arthur Levitt blasted the profession for poor-quality audits, and stepped down at the end of the year after seeing his proposal to limit consulting services for audit clients watered down. * Large firms seemed determined to get rid of their consulting units, selling or spinning them off, while Andersen Consulting was finally granted the divorce it wanted, for $1 billion and a change in name. It chose Accenture. * With CPAs still flooding into planning, fee-only vs. commission became an even bigger issue. * Firms felt the pinch from staff shortages and exorbitant salary demands. * Two acquisitions dominated the ongoing shakeout in tech: Microsoft's purchase of Great Plains for $1.1 billion, and Sage's purchase of Best for $445 million.
* The 150-hour rule finally comes into effect.
* Windows 2000 and XBRL are rolled out.
* The Financial Planning Association is created by the merger of the IAFP and the ICFP.
* Bill Carlino becomes editor of Accounting Today.
2001: The Cracks Show
As the dotcom meltdown got into full swing and the economy teetered, accounting was still going strong, with growth among the Top 100 of 10.4 percent. * The debate over Cognitor continued all year. The AICPA dropped the name, but staved off attempts to kill the project before finally deciding to let the membership vote on it - which they did in early 2002, resoundingly defeating it. CPA2Biz was launched in June. * The SEC and the AICPA shuttered the ineffective ISB, but the IASC launched the new International Accounting Standards Board, with Sir David Tweedie as chair, giving him three years to set up international standards. * After several years of wrangling, FASB officially killed pooling with SFAS 141.
And on December 2, Enron filed for bankruptcy.
* KPMG Consulting and Accenture raise billions in IPOs.
* Wells Fargo acquires H.D. Vest for $127.5 million.
* Sage loses the right to its name in the U.S., and opts for Best instead.
2002: Annus Horribilus
For the first half of the year, accounting news was all Andersen, all the time: a downward spiral of Enron investigations, fleeing clients, last-ditch attempts to save the firm, and the eventual June guilty verdict for obstruction of justice that sealed the firm's fate. * After the massive scandal at WorldCom, in July legislators cobbled together the Sarbanes-Oxley Act, which dominated the rest of the year. The Public Company Accounting Oversight Board, which it established, overcame some early stumbles and announced by the end of the year that it would begin inspections in 2003. * Accounting firms, meanwhile, had one of their worst years ever, with growth rates for the Top 100 of less than 1 percent, and the many accounting scandals damaging the profession's credibility and driving up malpractice insurance costs. * There was one bright side, though: All the publicity, apparently, began to make accounting more attractive to students.
* FASB gets a new chief, Robert Herz, and re-opens the issue of stock option expensing.
* E-filing hits 46 million returns.
* Amid ongoing software vendor consolidation, Microsoft buys Navision for $1.4 billion.
* The Justice Department pursues KPMG and BDO Seidman over tax shelters.
2003: The Era of SOX
With its first full year as law, Sarbanes-Oxley began to dominate accounting news in a way that no issue in the past two decades ever has. The PCAOB forged ahead: With William McDonough as chair and Douglas Carmichael as chief of auditing, the board began setting up a firm registration system and fees and inspection guidelines, while also reaching an accommodation with foreign regulators. * Worries surfaced of a "cascade" of runaway regulation as many states considered SOX-type rules and private companies felt pressure to conform to SOX, but the real cascade was in new engagements for midsized and small firms, as larger firms trimmed their client lists. * At the AICPA, questions about the viability of its specialty designations led to a year-long grassroots movement by credential holders to save them, and an eventual compromise that put them on probation.
* RIA and CCH offer outsourcing of tax returns to India.
* Mergers between JH Cohn and Videre, and between Dixon Odom and Crisp Hughes Evans, point to the rise of the super-regional firm.
* Over 50 countries say they will adopt International Financial Reporting Standards.
2004: Merger Marathon
With growth rates rebounding, audit fees soaring thanks to SOX, and practices changing, firms engaged in a frenzy of mergers - over a third of the T100 were in at least one in 2004. The SEC moved back a number of SOX deadlines, but the PCAOB moved forward with Auditing Standard No. 2 on internal controls and its first limited inspections, which found deficiencies in audits from all of the Big Four. * The computerized CPA Exam debuted, and the AICPA both extended Barry Melancon's contract to 2010, and launched its very successful 360 Degrees of Financial Literacy campaign. * Despite strong opposition and threats from companies and Congress, FASB finally announced that stock options will have to be expensed.
* SAS 99 on fraud comes into effect.
* The SEC proposes letting companies report in XBRL.
* Assets in 529 college plans reach $43 billion.
2005: Regulation, Relocation
The PCAOB released the results of its first full inspections, as well as tough rules on tax services for auditors, and chair William McDonough announced he would step down. * The AICPA faced serious questions from dissident members, and announced both that it would move many staff to North Carolina to save money, and that CPA2Biz was finally profitable. * The SEC and the European Commission set up a roadmap aiming for convergence of accounting standards by 2009. * President Bush established a panel to come up with tax reform ideas; after a year of investigation, its recommendations were quietly left to die. * McGladrey & Pullen acquired AmEx TBS, creating the first non-Big Four firm with over $1 billion in revenue, and after months of tense negotiations, KPMG paid over $450 million to settle with the feds over questionable tax shelters.
* The Supreme Court overturns Andersen's conviction.
* Best Software acquires the rights to call itself Sage starting in 2006.
* Microsoft releases Microsoft Office Small Business Accounting.
2006: Rethinking SOX
The PCAOB acknowledged that many companies were struggling with Section 404, and began to work with the SEC on ways to ease the workload, even as it faced a public backlash and a legal challenge to its constitutionality; over the summer, Mark Olson took over as chair. * FASB proposed giving companies the option of reporting in fair value, and worked with the AICPA to create a committee to work on private company issues. * The AICPA completed the bulk of its move to North Carolina, while the IRS was flooded out of its headquarters over the summer, but was able to stay in business and pursue a private tax collection initiative, while legislators began to focus on the growing tax gap. * Firms were enjoying plenty of work - particularly in new niches - but were pinched by a significant staff drought.
* An AICPA report says women make up 19 percent of all firm partners, up from 12 percent 10 years earlier, but only 38 percent of firms offer alternative career paths.
* The ASB introduces new standards on risk assessments in audits.
* The PFS credential meets its membership goals.
2007: Ready for the Future?
After much debate, the SEC and PCAOB offered new guidance aimed at reducing the cost and effort of Section 404 audits. * FASB and the IASB planned a major push for convergence, and the SEC proposed allowing public companies to choose which standards to file under, while GASB faced significant challenges to its standard-setting authority from Texas and Connecticut. * The AICPA issued new standards for valuation engagements, joined the largest firms in forming the Center for Audit Quality, and pushed ahead with an initiative on CPA mobility. * FIN 48 on accounting for income tax positions came into effect, and tax preparers expressed concern about the burgeoning practice of patenting tax strategies. * In a new twist on capitalizing a practice, Top 100 Firm Smart and Associates received $60 million in private equity money.
* The IRS loses both Mark Everson and his successor as commissioner, Kevin Brown, to the Red Cross.
* The SEC releases XBRL for GAAP.
* Accounting Today celebrates its 20th anniversary with a redesign.
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