AICPA and NASBA work on evolving the CPA licensing model
The American Institute of CPAs and the National Association of State Boards of Accountancy have teamed up on a new initiative to protect professional licensing for CPAs, while also making strides on a related effort to update the CPA licensure and examination process with more advanced technology skills to meet the changing needs of businesses and accounting firms.
The AICPA and NASBA introduced on Monday the Alliance for Responsible Professional Licensing, a coalition of advanced professions — including accountants, architects and engineers — that’s focusing on educating policymakers and the public about the importance of rigorous professional licensing standards.
The move comes in response to an ongoing nationwide movement to eliminate or diminish government licensing of specific professions and businesses, particularly at the state level.
AICPA and NASBA will work with other members of the alliance to inform lawmakers about the need to maintain standards for highly complex, technical professions like the CPA profession that have a clear impact on the public’s fiscal health and welfare. Other members of the ARPL include the American Institute of Architects, the American Society of Civil Engineers and the National Society of Professional Engineers. The coalition aims to ensure the voices and concerns of these professions are heard by lawmakers amid the growing debate around licensing.
“Weakening professional licensing standards on a state-by-state basis will destroy the confidence in qualifications and completely disrupt existing mobility models for advanced professions like ours,” said AICPA president and CEO Barry Melancon in a statement. “Employers will be less inclined to accept out-of-state licenses if some states have rigorous requirements and others have weak requirements. The result: It will become more difficult for CPAs to move and maintain their careers across states.”
“When a CPA performs an audit of a business or government, the public must have confidence in its accuracy, thoroughness and integrity,” stated NASBA CEO Ken Bishop. “The most effective way to maintain this confidence is to continue to have CPAs show rigorous education, examination, and experience for their licensing requirements. Broad-brush attempts to weaken or undermine licensing requirements threaten to sweep up advanced professions like certified public accounting, diminish public protection and jeopardize the fiscal integrity of the work our professionals do.”
More information about ARPL can be found at http://www.responsiblelicensing.org.
On with the evolution
Last Friday was the official deadline for comments on the CPA Evolution project that the AICPA and NASBA have been working on to transform the CPA licensing model and adapt it to the rapidly changing skills and competencies needed from accountants, especially in the technology area. However, AICPA and NASBA officials told Accounting Today they are still going to be seeking further input before anything is finalized.
“This project started about two years ago,” said Sue Coffey, executive vice president of public practice at the AICPA. “In February 2018, we started to talk to stakeholders about what was going on in the marketplace, what the changing environment was within the profession, what the skill sets needed were within both public and management accounting, and how we were seeing shifts in hiring patterns within firms.”
The AICPA talked with representatives of the Big Four firms as well as its own Governing Council about the project. After the Spring Meeting of Council last year, it began a broader dialogue and started talking to the general membership as well as the state and the federal regulatory community.
“We’ve been speaking with our small-firm networking groups, our large-firm networking groups,” said Coffey. “We’ve been speaking with academia. We’ve been speaking with the CFOs. We’ve been having focus groups at all of our conferences, any venue where we have a group of stakeholders — whether they’re practitioners, members, regulators — we have been very active. We have not missed any opportunities.”
Much of the feedback to date has been about the need for more technology skills. “The genesis of the initiative came jointly from the organizations at some senior executive leadership meetings, that because the profession is changing so rapidly because of technology, that in turn is requiring standards to change, auditing standards especially,” said Colleen Conrad, executive vice president and chief operating officer at NASBA. “From our point of view, there’s a public protection mandate, that we need to have CPAs that can handle the new standards, working with technology on behalf of clients, as they audit clients and do tax work. We need to ensure that the profession keeps up with everything that’s changing in order to provide the best service for their clients ... and also to ensure that the public that relies on the CPAs is protected.”
The AICPA and NASBA don’t expect accountants to become technology experts to the extent that they would be writing computer programs or staffing the IT help desk.
“We’re not talking about coding or mainframe management or anything like that,” said Coffey. “We’re talking about higher-order skills in emerging technologies, data analysis skills, maybe data science skills, skills and competencies in IT systems and controls, and understanding correlations among data sets, and understanding how systems connect, and what that means for quality control.”
For example, more auditing firms are using technologies such as data analytics and artificial intelligence to expand the number of financial statements they can process. “Now it’s becoming more and more necessary to audit through the computer, with the use of artificial intelligence and bots and all of the data analytics software that’s being used in the audit arena,” said Conrad. “The bigger firms are doing continuous auditing through the computer. Auditors need the skills to be able to provide those services and understand what’s happening within the computer in order to attest to its accuracy.”
Neither organization has yet defined exactly how to define the new skills that will be asked of CPAs.
“I think there is general consensus that whatever we do, most if not all constituents prefer one pathway,” said Coffey. “That means that everyone has to exhibit a set of core competencies and knowledge to be called a CPA. I don’t think there’s any question of that. Now what that core competency is, is another question. We don’t know the answer to that. We’ll have to continue to talk to stakeholders about what that is.”
The AICPA and NASBA will be going through the feedback they receive and seeing what changes will be needed on the new model for CPA in three main areas that Coffey refers to as the three E’s : education, examination and experience.
“Within education, what a curriculum could or would look like,” she explained. “With an exam, what types of changes would need to be made, both in structure and content to the CPA Exam. Then, in experience, are there any additional experience requirements that are needed, particularly for the performance of assurance services?”
The changes would mainly apply to new CPAs, as opposed to existing license holders. “This is really about entry into the profession, but we are very involved in developing programs to reskill existing CPAs because we think that is just as important as what the new pipeline coming through looks like,” said Coffey. “We’ve been working on a number of programs in the technology area to help practitioners understand foundationally what they need to know and then how they can become an expert and then apply that in practice. We think that’s just as important, but it’s a different initiative.”
Both the AICPA and NASBA want to provide up-to-date skills to existing CPAs, but that’s a separate initiative than the CPA Evolution program.
“This part of it is initial licensure-related,” said Conrad. “There is still a second huge component of it, which is ensuring those that are already in practice gain the skills that they need as the profession changes and the standards change and the methodologies change. This particular change is focused on initial licensure. It’s looking at the education requirements to become licensed, the 150 hours, the specificity the state boards have in their requirements, what courses they have to take, and it is truly looking at the CPA Exam, to see how it should change. The AICPA has a very interesting separate initiative on the CPA Exam right now.”
Also separate is any effort to improve the training in areas such as professional skepticism and ethics. For the AICPA, that is being worked on by the Auditing Standards Board, which is in the process of updating its standards. “They’ve already revamped their agenda and reprioritized it so that the most important projects are at the top of the list, and professional skepticism is on there," said Coffey. "Auditing of estimates, audit evidence have all been elevated, and they’re working on them, but they’re also going through a strategic planning process, and they will have an exposure period for a new strategic plan later this year or early next year.”
NASBA sees that type of training more in the context of the CPA Exam. “Every time a practice analysis is done on the CPA Exam, those kind of come back as the big-ticket items that those who supervise newly licensed CPAs want them to have better skills in,” said Conrad. “Analysis, skepticism and ethics are a must have.”
International skills are also increasingly important as accountants often get work assignments abroad or with clients who do business overseas. The AICPA is working to include such skills in its syllabus for training management accountants internationally as part of its Chartered Global Management Accountant program that it runs with the Chartered Institute of Management Accountants.
“We are in the process of creating a finance leadership program that is a series of educational courses that ultimately lead up to the CGMA, but may be used in chunks, so that if an individual is interested in the application of some of these skills, just within the context of a single piece of the program, we’re embedding all of these skills into our finance leadership program and the management accounting syllabus,” said Coffey.
The state boards of accountancy will keep providing input to the AICPA and NASBA on the development of the CPA Evolution program. “The state boards are very important in this project,” said the AICPA’s Coffey. “We are working hand in glove with NASBA. We are aligned on the principles. Everything we‘re doing with them is hand in glove, but the state boards themselves are critical to the success of the project. They’ve been involved and we need to make sure that they agree with what we come up with.”
“I think the feedback has been fairly uniform from the state boards so far,” said NASBA’s Conrad. “There was some initial discussion of possible multiple pathways to become a CPA, and that has not been widely accepted across the board from our stakeholders or AICPA’s, but the core reason for doing this is everybody understands we do need to continue looking at this, and making sure this profession continues to evolve. Our point of view in representing the regulators is to ensure that CPAs have the competencies necessary to protect those that are relying on their services, whether it’s shareholders, lenders or just the clients themselves.”
There are plans for an exposure draft with proposals that the state boards would first have to approve, and state lawmakers might even need to get involved to update the relative statutes. “There will be a process to go through,” said Conrad. “Any change we would have to make would end up having to go through state board rule changes or statute changes, and all of that will be a very public process.”
The AICPA and NASBA are still accepting input as they work on shaping the new licensure model and coming out with an exposure draft in the near future. Accounting professors at colleges and universities will have a chance to weigh in during an American Accounting Association conference this week.
“This has been a continual process,” said NASBA’s Conrad. “We did open it up for public comment in early June. But even before that we had been socializing the principles through the AICPA’s Council, through committees of their organization and ours that would have a special interest in them. ... We have a joint senior leadership meeting coming up here later in the month where we are now starting to say, ‘OK, here are the guiding principles, the draft principles, we put out there. Here’s the feedback we’ve gotten on those. With that feedback, what is the next step? What changes to the licensure model should we be looking at based upon all of the feedback received?' Those are our next steps, because when they look at the principles, some say, ‘I need more details. The devil’s in the details.’ That’s part of the next step: coming up with some ideas for models that have more details and sharing that back with our stakeholders.”
The AICPA is planning to unveil some of those details at its fall meeting of Council, and the program likely won’t be finalized until next year.
“We’re hoping that we will have something to speak about at our October Council meeting,” said Coffey. “That will provide us some additional input into some type of model that we’ll work toward next year, and then we’ll have another round of dialogue about what that model is, and whether or not it’s a workable solution. So sometime next year we’d like to finalize this.”